A downbeat assessment by Bernanke or dismal employment data would put the dollar and carry trades back on the defensive, but a more positive tone should be retained.

Market fear has eased over the past few days and this has lessened immediate demand for defensive currencies such as the Japanese yen and Swiss franc

After a dismal first quarter, players are looking for some respite at the start of the second quarter which has triggered a significant relief rally for the major global stock markets. The move has been enhanced by overseas fund allocation by Japanese investors at the start of the new fiscal year.

There is also grater optimism that the major US investment banks can boost capital ratios and manage the bad-debt situation

There are still major challenges ahead and there are series of hurdles this week. Fed Chairman Bernanke will face a grilling by congressional officials today and there are two key-labour-market releases this week