Major Currency Pairs

The euro traded lower against the U.S. dollar Thursday, after Federal Reserve Chief Ben Bernanke stated that the U.S. economy faced “significant risks”, but held back from indicating that the central bank was prepared to implement any fresh stimulus measures. In testimony to a congressional committee in Washington, Bernanke stated that the Fed remained "prepared to take action" to protect the U.S. economy if stresses on the financial system escalate, but stopped short of indicating what those actions might be. The single currency advanced to a session high against the greenback earlier after the People's Bank of China reported it will lower benchmark interest rates, in a bid to bolster growth in the world’s second largest economy and counter the effects of a slowdown in global growth. In other news, solid demand at an auction of Spanish government debt and fresh hopes that European leaders are stepping up efforts to tackle Spain's banking crisis also bolstered investor sentiment on the single currency. Spain’s Treasury successfully sold EUR2.07 billion of bonds, slightly more than the targeted amount, in an auction which met with solid investor demand, but saw borrowing costs rise.
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GBP/USD
The pound trimmed gains against the U.S. dollar on Thursday, pulling away from a one-week high after Federal Reserve Chairman disappointed market expectations for further stimulus measures to shore up growth. Investor confidence broadly strengthened earlier, after the People's Bank of China said it will lower benchmark interest rates by 0.25%, effective Friday, in a bid to bolster growth in the world’s second largest economy and alleviate the effects of the global economic slowdown. In the U.K., the Bank of England left interest rates unchanged at 0.5% and maintained its quantitative easing program at GBP325 billion. Data also showed that the U.K. service sector grew faster than expected last month, matching the strong rate of growth seen in April. The Markit/CIPS U.K. services purchasing managers' index came in at 53.3 in May, defying expectations for a decline to 52.7 and unchanged from the previous months reading.
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USD/JPY
The U.S. dollar rose to a one-week high against the yen on Thursday, amid growing hopes for further easing measures by the Federal Reserve and as uncertainty over the outcome of a Spanish government debt auction later in the day supported safe haven demand. Investors were eyeing a Congressional testimony by Federal Chairman Ben Bernanke about the state of the U.S. economy, with hopes fresh stimulus measures will be announced. On Wednesday, Fed Vice-Chairman Janet Yellen laid out the case for more easing to bolster a fragile economy as financial turmoil mounts in the euro zone. Yellen’s comments were echoed by Atlanta Fed President Dennis Lockhart, saying his level of concern has risen since the U.S. central bank’s April meeting. Sentiment remained vulnerable after the European Central Bank extended its policy of unlimited three-month loans for banks until mid-January 2013 at Wednesday’s policy meeting, but didn't announce any new three-year lending operations, disappointing hopes that the bank would implement fresh easing measures to help stabilize markets.
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USD/CAD
The U.S. dollar fell to a session low against its Canadian counterpart on Thursday, as sentiment on growth linked currencies was boosted after China’s central bank announced a rate cut, while investors awaited testimony by Federal Reserve Chairman Ben Bernanke later in the day. Market sentiment found support after the People's Bank of China said it will lower benchmark interest rates by 0.25%, effective Friday, in a bid to bolster growth in the world’s second largest economy and counter the effects of a slowdown in global growth. Meanwhile, solid demand at an auction of Spanish government debt and fresh hopes that European leaders are stepping up efforts to tackle Spain's banking crisis also bolstered demand for higher-yielding assets. Investors were looking ahead to Fed Chair Ben Bernanke’s testimony on the U.S. economic outlook before a congressional committee in Washington later in the day, amid speculation that the U.S. central bank is mulling new measures to stimulate growth.
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