Federal Reserve Chairman Ben Bernanke spoke before Congress today, reviewing the Reserve's forecast for the U.S. economic recovery. While recent economic data has been encouraging, Bernanke came across as more dovish than generally expected, placing emphasis on the weak labor market and low inflation. His tone clearly disappointed USD bulls, and traders drove the Dollar lower against most currencies. Bernanke described the recovery as nascent and said demand was growing at a moderate pace, but for those analysts predicting earlier rate hikes there was little to build on in his statement. Clearly, Bernanke feels that overall risks are still to the downside, and that rates must remain low for an extended period to ensure the recovery doesn't falter. Indeed a glance across the pond should be warning enough: both the UK and the Eurozone are struggling to hold on to the little growth impetus that has been generated, and the threat of a double-dip recession still hangs in the air. The BoE is deliberating further easing, and the ECB has its hands tied by the serious sovereign-deficit situation in southern Europe. Bets against the Euro and the Pound have driven the currencies lower of late against the greenback, but on the back of the Chairman's dovish testimony, some of those positions were taken off. In other news, New home Sales for January disappointed the markets massively (actual 309k vs. 354k forecast) further undermining the bullish views on the U.S. economy.
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