Welcome to the Pure FX account of the latest changes in the foreign exchange rates.
This is intended as a brief guide to movements in the exchange rates over the weekend, to put you in the best position when you exchange currencies.
Surely the Fed will begin QE3 now? The US dollar fell across the board over the weekend, as the US economy created just 96 thousand new jobs in July, spurring hopes that the Federal Reserve will inject more stimulus to boost the economy.
Last Friday’s Non-Farm Payroll (measuring job creation in all but agricultural sectors) compares to forecasts for 125 thousand new jobs, and is less than half the pace the economy was creating jobs in late 2011.
However, though we might normally expect this to strengthen the buck, as the markets dive for cover, the belief that this might encourage the Fed to print more money this week proved US dollar negative, helping the pound and euro gain against their Stateside counterpart.
Annette Beacher, head of Asia-Pacific Research at TDSecurities, for instances notes, “The weak payrolls report has put QE3 firmly on the agenda for this week.”
How This Affects You
If you plan to buy US dollars, then last Friday’s US job creation data is all to the good. This is because, as the US dollar weakens, you can obtain a higher total when you exchange your pounds or euros for them. That makes buying a home in the United States less costly, for instance, if you plan to emigrate.
In addition, if the Federal Reserve does in fact initiate QE3 this week, we would expect the buck to continue losing out on the foreign exchange market, further improving your exchange rate.
What’s Going to Happen Next
There are high hopes that the Fed will unveil a third round of quantitative easing this week. Patrick O’Keefe at J.H. Cohn for instance notes: “today’s report can only give ammunition to the activist members of the Fed board to loosen monetary policy.”
If it does so, that will hopefully stimulate demand in the US economy, and help reduce unemployment in the United States. In addition, it would likely further impede the US dollar as I mention.
Of course, high hopes always work both ways in the foreign exchange market. If the Fed disappoints we could see the US dollar quickly climb against the pound and euro.
Find Out More
I do hope this post has been useful. To find out more:
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