The EUR USD opened the New York Session sharply higher following the release of better than expected economic reports out from France and Germany.
The EUR USD opened the New York Session sharply higher following the release of better than expected economic reports out from France and Germany. The reports showed surprise improvements in French manufacturing and German services. This news set the table for a spike to the upside until Fed Chairman Bernanke declared that the U.S. economy was on the verge of emerging from the recession. His statement sent equity markets and the Dollar soaring putting downside pressure on the Euro.
Bernanke’s comments also helped weaken the GBP USD. The British Pound was trading slightly higher early in the trading session as it piggy-backed the move in the Euro. Fundamentally this currency pair remains weak because of the growing U.K. deficit and expansion of the Bank of England’s quantitative easing program.
The USD JPY erased early morning losses to post a gain at the midsession. Overnight the Japanese Yen was trading higher because of the reversal of the carry trade following weakness in Asian stock markets. The surge in U.S. equity markets and the thought of an economic recovery in the U.S. encouraged traders to buy the Dollar and sell the Yen throughout this morning’s trading session.
The USD CAD is trading lower at the midsession but well off of its low. An early morning rally in equity and oil markets helped boost the Canadian Dollar, but this currency began to lose ground following a bullish statement by Fed Chairman Bernanke regarding the U.S. economy.
The strong rally in U.S. equity markets has triggered demand for the higher yielding AUD USD and NZD USD. Gains were limited after Fed Chairman Bernanke said in a speech that the global economy was emerging from recession. He was particularly optimistic about the U.S. economy which triggered a sharp rally in the Dollar. Traders are taking his comments as a sign that the U.S. will lead the world out of the recession and that the Fed is likely to raise rates before other central banks.