Wednesday, 17 Mar 2010

Bernanke Due to Testify on Fed Supervisory Role of Small Banks

The US Dollar appears to be dropping across the board as risk appetite increases. The EUR has seen only a moderate upturn against the greenback while other currencies, such as the Pound, Swiss Franc, and Australian Dollar, have all made significant gains versus the USD. By far the fastest growing currency against the Dollar today has been the British Pound, jumping to 1.5360 this morning from Monday's low of 1.4975.

A combination of the FOMC rate statements made by Fed Chairman Ben Bernanke on Tuesday, and a better than forecast claimant count change in the UK, have both helped to cause such a trading environment. Should Bernanke's testimony later today provide further dovish statements, the chance that the USD will continue falling remains high.

Bernanke is due to testify alongside former Fed Chairman Paul Volcker to the US House Financial Services Committee at 18:00 GMT. The topic of today's testimony is to be about the link between the Federal Reserve's banking supervision of small banks and monetary policy decision-making. Bernanke is expected to defend his position on small bank supervision by the Fed in light of a Senate regulatory overhaul bill which may strip the Fed of this supervisory role should it pass. Forex market participants should anticipate volatility during this testimony due to the sensitive nature of the subject.