President Obama announced his decision to nominate to Janet Yellen as next head the U.S. central bank when the current Federal Reserve Chairman, Ben Bernanke, steps down next year. Yen and Swiss Franc dip as a result of the news.
Yen and Franc Decline
The Yen and the Swiss Franc dropped after officials confirmed that President Barack Obama has nominated Janet Yellen to replace Mr. Ben Bernanke as head of the Federal Reserve. This raised speculation that the central bank will continue with its current policies aimed at bolstering economic growth. The Swiss currency declined for the second day in a row as the President of the Swiss National Bank, Thomas Jordan, indicated that the country’s monetary unit remains overvalued. Mr. Jordan reiterated that the SNB plans to maintain the cap on the Euro so as to avoid having to intervene in the world currency exchange. The two safe havens fell further as the Dollar Index inched upwards in anticipation of the release of the Fed’s policy meeting minutes. Despite the fact that lawmakers have made no progress on putting together a viable spending bill or raising the debt ceiling, the news about Vice Chairman Yellen boosted positive sentiment among traders.
Industrial Production Disappoints
The British Pound weakened against all of its most traded Forex exchange counterparts subsequent to a report out of the Office of National Statistics which confirmed that industrial production in the U.K. fell by 1.1% in the month of August after having gained 0.1% in July. The metrics were certainly a disappointment, since economists had anticipated the sector would show an improvement of 0.4%. The news weighed on the Sterling, especially as the Bank of England prepares to issue its policy decision. The British currency traded at the lowest price in two weeks versus the U.S. Dollar, as the metrics suggested that economic recovery may not be as solid as previously estimated. Other releases revealed that the goods-trade deficit contracted to 9.63 billion Pounds in August, while analysts had forecast that the deficit would narrow to 8.85 billion Pounds. In light of the numbers, speculators predict the BOE will leave monetary easing and the benchmark interest rate at the current levels.
Euro Touches New Lows
The Euro also depreciated versus the U.S. Dollar and reaching a session low after the greenback was bolstered by news that Janet Yellen would be nominated for the position of Federal Reserve Chairperson. Meanwhile, in the Euro-zone, Germany reported increases in industrial production by 1.4%, surpassing forecasts for a 1% hike. The Euro rate inched higher versus the British Pound and fluctuated slightly versus the Yen.