The euro slumped against the US dollar as Federal Reserve Chairman Ben Bernanke said that the central bank will likely reduce stimulus by the end of the year. The currency was firm against some other majors, including the Great Britain pound and the Japanese yen.
The Federal Open Market Committee left its monetary policy unchanged today, but said:
The committee sees downside the risks to the outlook for the economy and the labor market as having diminished since the fall.
Moreover, the FOMC increased its projections for the next year’s growth and inflation, lowering the forecast for unemployment rate at the same time. It looks like policy makers are pretty confident in the health of the economy.
Bernanke spoke at a press conference after the announcement, saying:
If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year.
All in all, reduction of quantitative easing seems very likely and this drove the dollar up and other currencies down.
EUR/USD slumped from 1.3390 to 1.3283 as of 23:56 GMT today. EUR/JPY advanced from 127.62 to 128.30 and EUR/GBP rose from 0.8559 to 0.8582.
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