The Federal Reserve chairman Ben Bernanke caused a mass sell-off of global stock positions after confirming that the US central bank will aim to end its current quantitative easing programme by the end of 2014. The US dollar was heavily bought into on the back of the news after Bernanke attempted to reassure investors that it does not have a fixed plan in place and that any reduction in monetary stimulus will be data-dependent. Expectations are for the US unemployment rate to fall closer to 6.5 per cent and inflation to drop closer to the Federal Reserve’s targeted level of two per cent. Sterling’s recent strength could be brought into question with May’s retail sales figures due for release. Expectations are for the number to show an increase of 0.8 per cent on the previous month, which on the face of it seems highly optimistic considering the -1.3 per cent decline experienced in April. The euro has already started to experience positive results from the early release of French and German manufacturing and service PMIs. Notably, German service data came in above the forecasted 50 and returned to growth at 51.3 for June.

Sterling

Forecasts have predicted an uptick in May’s retail numbers by 0.8 per cent which could be deemed as optimistic, considering the poor health of the high street and the previous month’s drop of -1.3 per cent. Furthermore, the Bank of England minutes released highlighted concerns made by policymakers in regards to the potential use of further monetary stimulus to aid the UK economic recovery.

US dollar

The US dollar’s safe-haven appeal rose dramatically after Ben Bernanke outlined his plans to wind up the Federal Reserve’s current quantitative easing policy by the end of 2014. Positions in global stocks were sold off and placed back into the US currency with many concerned that the Federal Reserve is being overly-optimistic on the pace of the recovery of the world’s largest economy.

Euro

The single currency has started the day on the front foot after French and German PMIs were released above forecasts. Notably, the German services PMI has returned to growth territory after posting a figure of 51.3, which was well above the forecasted 50. However, reaction has been more muted than it otherwise may have been due to the attention on Ben Bernanke’s comments.

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