Bernanke to Testify Before Congress
Investors will be watching Bernanke’s testimony in front of congress on Wednesday and Thursday. Investors and traders will be watching for any statements that could indicate a change in US monetary policies or any hint of early withdrawal of emergency stimulus measures. San Francisco Federal Reserve Bank President Janet Yellen said that the US economy still needs extraordinarily low interest rates to deal with “undesirably low” inflation. Tomohiro Nishida of Chuo Mitsui Trust and Banking stated, “The market will try to determine what the next move by the Fed is likely to be and is waiting to see if Bernanke will say something which was not in his written testimony earlier this month. Although Fed officials sought to stamp out the idea that the discount rate increase is a tightening of monetary policy, the move did give the impression the Fed had started to exit from loose monetary policy.” Despite the fact that Bernanke is likely to keep rates low most experts believe the Fed will be the first major central bank to raise rates.
Risk Aversion High
Doubts about the pace of global recover are still lingering driving investors towards safe haven currencies such as the US dollar and the Japanese yen. On Monday the low yielding yen was a big winner pushed higher by concern about the Greek debt crisis. Fabian Eliasson of Mizuho Corporate Bank Ltd. Stated, “People are not feeling optimistic on the economic outlook and the yen becomes the safer choice. It could be a one-off low mark but the stock market is suffering from this now.” On Monday the yen gained 1.1% against the dollar trading at 90.15 and the greenback gained 0.6% trading at $1.3519. The yen gained the most against most major currencies after a report that showed that US consumer confidence fell to a ten month low. Brian Dolan of Forex.com stated, “It’s an abysmal consumer confidence number and the risk trade is under pressure as a result. Treasuries are rallying, yields are falling and that pushes the yen higher.”
Markets Euro Negative
Euro sentiment remains negative among investors due to Greece’s debt crisis and a report by Munich-based Ifo institute showed that German business confidence fell in February, the first time in eleven months. Speaking about the euro negative tone in markets Alan Ruskin of Royal Bank of Scotland stated, “The euro tone is so negative that strong data is helpful for the dollar (via rates), and weaker data is seen as mild negative for the euro (because of risk appetite consideration).” This ‘heads you lose, tails you lose’ logic can be dangerous, but is symptomatic of the negative euro tone.”
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