Euro dances around Bernanke speech

The euro has been trading sideways versus the US dollar as Ben Bernanke prepares to testify in front of Congress today.

The euro rallied versus the US dollar at lunchtime after Mr Bernanke released a statement hinting that the current quantitative easing (QE) programme will be kept in place for the foreseeable future. As QE entails printing more US dollars, traders bought the euro as they felt that a large supply of US dollars on the market will weigh on its value.

Away from the Federal Reserve, the cost of borrowing for eurozone countries has risen; Portugal and Germany held bond auctions and the yields for both countries has increased. The yield on a government bond is basically the cost of borrowing for that country, so the higher the yield the more it costs for the county to raise money. These results therefore indicate a lack of confidence in the respective governments.  

The yield on the ten-year German government bond is 1.57%, up from 1.55% at the previous auction, while the cost of borrowing for Portugal jumped to a nine-month high. This worried traders, as Portugal hopes to exit the bailout plan this year.

Spot FX EUR/USD chart

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