Tuesday, 21 Jul 2009

USD Trading Driven By Bernanke Testimony

The USD's trading today has been driven by the testimony of U.S. Federal Reserve Chairman Ben Bernanke's, which discusses his vision for the American economy. This has been the main economic news event for the past several hours, and is expected to dominate late market trading. Early trading today was dominated by the Bank of Canada (BOC) keeping Interest Rates unchanged at 0.25%, and Britain releasing Public Sector Net Borrowing figures of a record ₤13 billion. This led to large losses today for the GBP.

The USD reversed the previous 2 days' losses vs. the cable, and is up over 100 pips at 1.6408. The decline in the Pound comes about as fears grow over the British government's finances. The USD is trading slightly higher vs. the EUR, as there has been a decline in risk appetite today, due to fears that the $3 billion won't save U.S. finance group from bankruptcy. This led to the Dollar to tumble against the JPY, as many investors returned to safe-haven currencies.

Looking ahead to late night trading, we can expect much market volatility as Bernanke continues to speak about keeping U.S. Interest Rates low, despite continued improvements in the U.S. economy. Tomorrow at 14:00 GMT, Bernnanke is scheduled to testify before the Senate Banking Committee in Washington. Therefore any pessimism from his testimony from both today and tomorrow may lead the Dollar to make a bullish correction, as risk appetite plummets.