By TraderVox.com
Investors with a high hopes of a Greek deal have been dealt with a definite boost as reports that the European central bank is willing to exchange its Greek Bond investments with a possible loss of some significant profit in order to ease the burden on the Greek government and see a swift and fast end to the Greek debt crisis. Combine this with the renewed fears expressed by the Fed and you have got a strengthening euro and weakening dollar.
History tells us when risk appetite increases for the euro and at the same fearful remarks about the future of US economy occur on the same day, there is only one winner: the euro.
The dollar consequently lost against almost all its major rivals both yesterday and at the start of today. Though we are seeing some general range effect now with investors waiting to see if there will be further news from Greece.EUR/USD ended the day with a 122 pip( yes you heard right!) gap away from its opening price of 1.3253. GBP/USD closed the day at a 3 month high of 1.59. Definitely a bad day for Dollar long traders!
Fed chairman.ben Bernanke did not do the Dollar too much good on his part yesterday albeit innocently. He appeared extremely dovish in his much awaited testimony to the senate budget committee.
Recall that the recent NFP report for the month of January was good as it beat expectations. Despite that the FED chairman told the senate that the labor market was still a long way from what it should be and what they want it to be. Combine this with his other statements about a very slow recovery (lower than anticipated) and poor inflation reports; we can see that QE3 is not very far off the radar. A dollar sell off was inevitable.
The FED reserve bank of San Francisco president is expected to give a speech later today at 3.40 pm GMT and if his speech gives any hint of further QE then the dollar is in for a fall once more.
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