NEW YORK (ForexNewsNow) – Market experts around the world are eagerly awaiting Federal Reserve Chairman Ben Bernake’s keynote speech at the economic conference in Jackson, Wyoming on Friday 14:00GMT. While it is impossible to predict the reaction of the financial markets to the Chairman’s speech, it is possible to make intelligent predictions of the forthcoming market movements.
Analysts Express Various expectations
While many analysts believe Bernanke will announce a third round of quantitative easing (QE3) to help stimulate the US economy from its current stagnation, others say this option is increasingly unlikely due to the potential negative side effects of a new QE3 policy. These analysts argue that the most prudent option would be either an expansion of QE2 policies or simply an extension of the status quo which may in fact yield more positive results if given more time.
Risk manager at Easy-Forex, Markos Solomou, disagreed with this assessment, saying that “if Bernanke does not signal another round of quantitative easing we expect to see greater risk aversion in the market, which may also lead to a fall in the stock market and a strengthening US dollar. However, it will also signal possibly the beginning of a prolonged weak economy or even a double-dip recession. We may even see gold price drop on the back of a strong dollar.”
Whether Friday’s speech leads to a rise in the dollar or a further deterioration in global confidence in the US economy, one thing is certain – no matter what Bernanke says, there will be a definite change in the currency markets after the speech.
Forex traders should especially watch the EUR/USD, the GBP/USD and the Aussie dollar as well, which may continue to gain ground following the announcement. Forex markets around the world will likely be extremely volatile during and after Benanke’s speech, thus forex traders should be prepared to take advantage of the trading conditions and take extra precautions to identify the correct market direction before making trades.