Dollar Drops After Bernanke Speech & GDP Report

The US dollar fell today after the report showed that the US economy expanded with slower pace than was predicted by specialists and Federal Reserve Ben S. Bernanke hinted at possibility of additional stimulus.

According to the preliminary report, US gross domestic product grew 1.0 percent in the second quarter of 2011, following the increase by 0.4 percent in the first quarter. The advance estimate promised growth by 1.3 percent, while market participants expected rise by 1.1 percent.

Bernanke said today at the Federal Reserve Bank of Kansas City Economic Symposium in Jackson Hole, Wyoming, that the Fed has means to further stimulate the US economy, stating “the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus”. Chairman added that in the long run the economy can overcome its current difficulties:

Notwithstanding the severe difficulties we currently face, I do not expect the long-run growth potential of the U.S. economy to be materially affected by the crisis and the recession if — and I stress if — our country takes the necessary steps to secure that outcome.

The speech was well received by markets and stocks advanced, pushing the Standard & Poor’s 500 Index up 0.7 percent after it earlier fell 2 percent.

EUR/USD climbed from 1.4377 to 1.4476 as of 17:00 GMT today, following the drop to 1.4328. GBP/USD rose from 1.6278 to 1.6341 after it dropped to 1.6206 earlier. Meanwhile, USD/JPY tumbled from 77.44 to 76.67.

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