Stronger US Economy Brings Dollar Higher

The US strengthened on the speculation that the solid growth of the US economy will make the Federal Reserve to remove the stimulus and increase the interest rates.
The US gross domestic product grew 3.1 percent in the last quarter of 2010. That’s compared to the previous estimate of 2.8 percent and the forecast of 3.0 percent. The claims for unemployment benefits decreased to 382,000 from 387,000 last week. Analysts suggested a decrease to 388,000.
Federal Reserve Bank of Philadelphia President Charles Plosser told about the necessity to prepare a plan for removing the stimulus from the US economy, saying:

Monetary policy will have to reverse course in the not-too-distant future and begin to remove the massive amount of accommodation it has supplied to the economy. Failure to do so in a timely manner could have serious consequences for inflation and economic stability in the future.

He also said that his “proposed strategy involves raising rates and shrinking the balance sheet concurrently and tying the pace of asset sales to the pace and size of interest rate increases”.
EUR/USD closed at 1.4086 after opening at 1.4171, while GBP/USD fell from the opening price of 1.6120 to 1.6040. USD/JPY opened at 80.99 and closed at 81.33.

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