Fed Chairman’s Comments Impact Dollar Movement

Forex traders should factor the effect of Fed Chairman Ben Bernanke’s words on the currency market before they get into any deals in the coming weeks. In his semi annual testimony Bernanke underlined the improvements that have been witnessed in the beleaguered U.S. economy. This indicated to traders that the government may not be as keen to continue with monetary easing and bailouts in the coming times.

Since these policies were mainly aimed at supporting the economy and preventing it from crumbling entirely, any sign of returning stability will be taken as an indicator that these are no longer needed.

Dollar Moves Up 

In the wake of this statement, dollar values showed an improvement. Analysts believe that the upward revision to the U.S. GDP data for Q4 may also be an important factor behind this positive movement of the dollar. For Forex traders, this is the time to watch and see whether the dollar can sustain its current position and/ or move up even further. Market indicators such as increased movement towards cash backed assets will demonstrate a returning confidence which, in turn, augurs well for industrial activity.

GBP/ Dollar Dynamics 

As far as the GBP/ Dollar dynamics are concerned, month end flows have ensured that status quo is being maintained for now. However, this situation may not last very long especially if the dollar continues to gain strength. This is mainly because, even as of now, the GBP is not in a particularly strong position. Result- it is likely to be left behind if the dollar rallies. For those who have exposure to the GBP- Dollar pair, keeping a close watch on market movement and market sentiment will both prove highly beneficial.

Other Factors Influencing the Currency Market

At present there are also a few other factors that could impact the currency market in different ways. Forthcoming data from the U.S. will not only tell whether Bernanke’s statement about the improving U.S. fortunes is on the mark, it will also show how that economy is reacting to this vote of confidence. Meanwhile, the jobless claims, infrastructural spending reports and the events unfolding in the Eurozone will all have a part to play in determining exactly how currencies will be moving in near future.