USD to weaken if Bernanke maintains this week’s theme of dovish Fed speak
Chairman Bernanke testifies today at 14 GMT (10am ET) amid heightened focus on Fed exit planning. The USD has given back some ground this week, predominantly against the EUR, as Fed voters have consistently signalled a reluctance to consider tapering of asset purchases. Bernanke’s comments will follow a theme of dovish Fed speak this week from Chicago Fed President Evans, St. Louis Fed President Bullard and, more notably, core FOMC member William Dudley. A similar message from Chairman Bernanke today could see USD long positions come under some more pressure. Later in the day, the minutes to the Fed’s April 30/May 1 meeting are released. This meeting preceded the strong April payroll report, and our economists note that characterizations of the economy will likely reflect the softer tone in data available to the Committee at that time. We think the USD rally during the first three weeks of May is not well grounded in fundamentals and will likely reverse in the weeks ahead. However, it may take an accumulation of weaker US data to break down what has become an increasingly entrenched bullish dollar consensus. On the data front today, US existing home sales for April should rise to new cycle highs given strength in building permits reported last month.
Click here to read the full report: FX Daily
BNP Paribas