The dollar rose on Friday because of positive expectations that Jackson Hole would lead to further stimulus and after the release of higher than expected economic data. In the end Bernanke’s speech on Friday afternoon was too fateful to boost moral, with the Chairman admitting the humble truth that: "Central bankers alone cannot solve the world's economic problems." Revised GDP was lower – but higher than expected and Personal Consumption was up, although the Michigan Confidence Survey ticked lower.. And this morning the dollar traded mixed, rising against the euro but falling to the yen. At midday GMT the dollar traded at 1.2703 to the euro and 1.5547 to the pound.

   The euro traded mixed before the weekend after data released showed a lower German CPI reading, which given it is the EU’s economic powerhouse, immediately raised question marks over the sustainability of the euro-zone recovery. Data out today was mixed with the Business Climate Indicator coming in well below estimates and consumer confidence tipping lower but Economic Confidence and Services Confidence showing small gains. At midday GMT the euro was trading at 1.2703 against the dollar and 0.8169 to the pound.

   The pound was mostly down after data released fell below expectations and reinforced a more dovish outlook. Data was mixed with Exports up and Private Consumption up but Business Investment and Capital spending down raising fears the economy might be slowing down. At midday GMT sterling was trading at 1.5547 to the dollar and 131.56 to the yen.

   The yen fell towards the end of the week after political leaders called an emergency meeting to discuss economic problems and the overly strong yen. By Monday morning the BOJ announced concrete measures to ease deflation and devalue the yen, which consisted in increasing the scope and duration of available credit. The markets reacted negatively to what they saw as adequate and this morning the yen began strengthening again, particularly against the dollar. At noon GMT the yen was trading at 84.62 to the dollar and 107.49 to the euro.

Analysis prepared by:

Joaquin Monfort
Forex4you analyst