Bernanke takes the stage
Chairman Bernanke testifies today at 14 GMT (10am ET) amid heightened focus on Fed exit planning. The USD has given back ground so far this week as Fed voters have consistently signalled a reluctance to consider tapering of asset purchases. After Chicago Fed President Evans speech on Monday which resisted talks of tapering until more labour market data is available, St. Louis Fed President Bullard indicated on Tuesday that he does not see a good case for tapering in absent of a rise in inflation. More notably, core FOMC member William Dudley stressed the risks of exiting policy prematurely. He noted the Fed could increase as well as decrease the pace of purchases in response to data. A similar message from Chairman Bernanke today could see USD long positions under more pressure. The minutes to the Fed’s April 30/May 1 meeting will also be watched. 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 of 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.
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BNP Paribas