Fed announces Q3 Fed’s monetary policy and how it affects GBP EUR exchange rates

The Fed has just announced further Quantitative Easing known as Q3 which has seen the exchange rates move rapidly this afternoon as Stops and Limits have triggered. EURUSD has moved by 0.5% within 5 minutes and GBPUSD has swung by 1 cent already this evening.  However, with this extra stimulus of US$40bn per month until the end of 2012. This should in theory keep interest rates low or even drive them lower helping with the mortgage back securities and in essence an attempt to lower US debt. My personal take on this is that each time the US provide QE it seems to weaken the Dollar as global markets see the attempt to stabilise things as positive meaning more confidence returns to the Pound as a safe haven and also the Euro. EURUSD is the highest its been in months currently at 1.2950 and is likely to hit resistance at 1.30 over the next 24 hours.  I feel that we have more mileage for GBPUSD towards recent highs but this could spell bad news for those needing to buy Euros as confidence returns to the single currency and see GBPEUR exchange rates drop off.

I’ve found this BBC article interesting which should explain the Fed’s monetary policy in plain English http://www.bbc.co.uk/news/business-19592151

With GBPEUR having dropped since last Thursday following Mario Draghi’s comments to stabilise the Euro, the German vote allowing Germany to keep funding the Euro and now QE3 in the US we could see a continued strengthening for the single currency to the lower level of 1.24 over the next trading session. For further up to date information about this data release and what we may expect early next week particularly for EURUSD and GBPEUR exchange rates feel free to contact me directly Tom Holian [email protected]