All trading involves risk. Losses can exceed deposits.

EUR/USD breaks below 1.3200 level

The last 24 hours have seen the currency cross give back 200 pips of gains made in the last three weeks.

All trading involves risk. Losses can exceed deposits.

As with many markets today, last night’s comments by the Federal Reserve chairman Ben Bernanke have had a profound effect on the US dollar. The quantitative easing policy is fundamentally a process that weakens the strength of the dollar, as it requires the creation of more money. The beginning of its demise is dependent on the continuing improvement of economic data.

The three triggers that will need to be reached are the lowering of the US unemployment level, the continuing improvement of the US economy and an increase in inflation. The first two triggers have been making solid progress in the right direction, but the inflation rate is still a considerable way away from the targeted 2%.

With last night’s Chinese manufacturing figures indicating that the speed of growth is continuing to cool, and the fact that the US economy is flirting with an end to its stimulus policy, plenty of focus will now shift onto the European Central Bank (ECB).

Many anticipated that the ECB would have already started trying to stimulate the region back into growth; however as yet its only attempt has been the interest rate cut a couple of months ago. It is likely that traders will be hoping to see a considerably more proactive plan come into play in the near future.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.