In a week that's been fairly light on the data front, all eyes will be on Bernanke's testimony to the Senate Budget Committee at 1500 GMT/ 1000 ET today.
With interest rate differentials determining market moves for the time being, investors are on central bank watch, and Bernanke's testimony has the potential to cause a flurry of excitement in FX markets.
The analysis below shows the % move in the dollar index (the dollar versus the currencies of the US's major trading partners) and in EURUSD in the two days after a major speech by Bernanke.
These are the speeches we have looked at:
Aug 27 - Bernanke speech at Jackson Hole Central Banks conference when he first touted the prospect of a second round of QE
Sept 24 - Bernanke's speech entitled the Implications of the Financial Crisis for Economics, Princeton University
- 15 Oct - Monetary Policy Objectives and Tools in a Low-Inflation Environment, Federal Reserve Bank of Boston
- Nov 19 - Rebalancing the Global Recover, At the Sixth European Central Bank Central Banking Conference, Frankfurt, Germany
- Dec 5 - Bernanke's appearance on CBS
- Feb 3 - The Economic Outlook and Macroeconomic Policy, At the National Press Club, Washington, D.C.
- Bernanke's impact on the dollar index:
Bernanke's impact on EURUSD:
Since the end of August, Bernanke's speeches tend to coincide with the dollar appreciating rather than falling.
Since the announcement of QE2 on November 3 2010, Bernanke's speeches have coincided with more consistent upward moves in the dollar, on average the greenback has appreciated by 0.8%. This has also coincided with the pick- up in US growth since the Autumn.
We can make two assumptions from this:
1, Even though Bernanke continues to reference the weakness in the labour market, the market reacts more to his comments on the improving growth outlook:
His speech at the National Press Club in Washington on 3rd Feb highlights this. He said that it will be several years before the unemployment rate has returned to a more normal level but the bit the market latched on to was his comments on growth: More recently, however, we have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold. The dollar rose by 0.4% on the back of these comments.
2, The US dollar is increasingly showing signs that it is trading like a growth currency, and the market seems to be ruling out the prospect of further quantitative easing from the Federal Reserve.
Kathleen Brooks| Research Director UK EMEA | FOREX.com
d: +44.(0).20.7398 5024 | f: +44.(0).20.7929.2010 | e: email@example.com| w: www.forex.com/uk
12 Camomile Street | 9th Floor | London EC3A 7PT
Now you can follow us on Twitter: http://twitter.com/forexresearch
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Authorised & Regulated by the Financial Services Authority
Forex and other leveraged trading can involve significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary. This email contains confidential information belonging to FOREX.com and is intended solely for the addressees. The unauthorised disclosure, use, dissemination or copying (either whole or partial) of this email, or any information it contains, is prohibited. FOREX.com assumes no responsibility for errors, inaccuracies, or omissions in these materials. FOREX.com does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. We respect your privacy. Email addresses are not released to third parties.
FOREX.com UK a trading name of GAIN Capital - FOREX.com UK Limited and is authorised and regulated by the FInancial Services Authority. FSA No. 190864.