Bernanke Sees Stimulus Are Still Needed | IFCM
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Bernanke Sees Stimulus Are Still Needed - 8.6.2011

Asian stock markets fell widely on Wednesday, following US stock losses' amid speculations the global economic growth is slowing down. According to a World Bank economic outlook report, advanced economies are seen growing by 2.2% this year and by 2.7% in 2012, in comparison with projected 6.3% and 6.2% advances in the emerging regions. However the report said developing economies need to accelerate spending cuts and interest-rate increases as they are facing higher inflation pressure and overheating. The bank has also cut its forecast for the US expansion to a 2.6% annual pace for 2011 from the January estimate of 2.8%, while the euro area is expected to grow by 1.7% in 2011 and by 1.8% in 2012, compared with a January forecast of 1.4% growth this year and 2% next year. In foreign exchange markets the yen strengthened against the dollar and the euro as stocks declines spured demand for the Japanese currency as a refuge, while growth-sensitive currencies such as Australian and New Zealand dollars fell this morning. US Dollar The dollar lost ground against the yen after the Fed President Bernanke said economic growth has been “somewhat slower” than expected, but would recover in the second half of 2011 despite recent signs of weakness from manufacturing industry and labor market. The disappointing data, combined with the coming end of the Fed's bond puirchase program, also fnown as quantitative easing, has weighed on investor sentiment. “The US economy is recovering from both the worst financial crisis and the most severe housing bust since the Great Depression, and it faces additional headwinds ranging from the effects of the Japanese disaster to global pressures in commodity markets,” the head of the FRS said. In such conditions Bernanke added that “accommodative monetary policies are still needed,” and “the best way for the Federal Reserve to support the fundamental value of the dollar in the medium term is to pursue our dual mandate of maximum employment and price stability, and we will certainly do that.” Federal Reserve Bank of New York President William Dudley in another speech said commodity prices aren't likely to sustain “explosive” gains, but added that the Fed “will have to monitor inflation expectations closely to ensure that they do not become unanchored.” Euro The euro strengthened yesterday against the dollar on positive economic data from Europe and expectations the European Central Bank will signal higher rates in coming months at its meeting on Thursday. Better than expected economic data from Europe also supported the single currency as euro area retail sales and German factory orders surprised investors. Euro zone’s retail sales advanced in April to a 1.1% annual pace after a 1.7% drop in March, according to a report released yesterday. Moreover Germany, the Europe’s leader, showed factory orders rose by 10.5% in April from a year before, compared with expectations of a 9% gain. Today we are expecting European first quarter GDP reports which may show the region expanded by 0.8% to a 2.5% annual pace. Pair EUR/USD advanced yesterday to 1.4695, but traded in a narrow range today with a potential to grow further.
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