Friday, 26 August 2011

Foreign Exchange Insight: GBP USD Poised ahead of Jackson Hole Symposium EUR Gains on Hope For Stability

The Pound Euro exchange rate (GBP EUR) is 1.1305. The Pound Dollar exchange rate (GBP USD) is 1.6324. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5550.

The pound sold off yesterday against most of the world's most actively traded currencies with CBI figures showing a slowing in demand in the UK economy. This has not helped in setting the tone into trade this morning with the headline Q2 GDP revised figures due for release today.

The UK Q2 GDP figures are not expected to be altered and will serve as a harsh reminder that the outlook for the UK economy is still bleak with any chance of the BOE raising interest rates being highly unlikely until the latter part of 2012.

The Jackson Hole Economic Symposium will take centre stage today as markets attempt to second guess whether Bernanke will hint at a requirement for further stimulus for the US economy. A third round of Quantitative Easing could help speed up the US economic recovery however is looking increasingly unlikely with markets buying into the USD aggressively yesterday.

It is somewhat unlikely that Bernanke will use the QE3 terminology at the Jackson Hole Economic Symposium, this would adversely affect the markets, more likely is that Bernanke may comment on aid packages to improve the functioning of struggling asset classes, fortifying liquidity and boost growth.

Markets will pay close attention to comments made from both key speakers Bernanke and Jean Claude Trichet. Traders will be looking for reassurance over financial stability in markets that have been dominated by uncertainty in the past couple of weeks. It is clear that conditions are worsening in the Eurozone and with ECB president Trichet attending some might hope for talks of a co-ordinated effort to try and resolve the current global instability. 

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