Overall: The overnight session was relatively slow, despite the loaded economic release calendar. Only the yen and the swissy managed to pull some strong moves, while the rest of the majors traded near important swing points, but lacked any real momentum. Markets remained subdued until Mr. Bernanke provided a lot more clarity regarding the government's new stress-tests for the nation's 20 largest banks and sought to downplay the possibility of nationalization in response to Senator's questions. Stocks took off from that point and the dollar declined against the higher-yielders as it gained further on the yen.
In U.S. economic news, prices for existing single-family homes in 20 metropolitan areas fell 18.5% in the year to December, according to the latest report from the S&P/Case-Schiller Home Price Index, a new record pace of decline. Also, Consumer Confidence reached another all-time low in February, according to the latest report from the Conference Board. The index declined to 25.0, down from January's 37.4, worse than economists' expectations of 35.5.
The Euro (Eur/Usd) advanced 70 pips during the overnight session, but the pair lacked any real momentum or volume. That changed after Mr. Bernanke provided further clarity regarding the government's new stress tests for the banks, and the pair rose with equities to make its highest close since Feb. 13.
The German IFO business climate fell slightly lower, to 82.6. This is the first time in the last 6 months the German business expectations has shown signs of stabilizing. The Euro-area current account was released at -7.3B, much better than analysts’ expectations. The previously released number, for the month of November, was revised lower, to -13.9B. Industrial orders tumbled in December for a fifth consecutive month. The market anticipated industrial orders would fall 4.9% in December, instead of the released number that saw orders decline by a record 5.2%
The Pound (Gbp/Usd) was trapped between the 20 and the 50-day simple moving averages, which have caused the pair trade almost flat overnight. But sterling took off as stocks advanced, gaining nearly 100 pips in the hour after 13:00 EST.
The number of mortgages approved by the BBA rose by 23.4K, higher than analysts’ expectations. The previously released number, for the month of November, was revised higher, to 22.4K. In January, net mortgage lending rose by £2.9 billion, still under the average of the previous six months
The Aussie (Aud/Usd) struggled to break above the 20-day simple moving average overnight, as has been the case for the past few days. That level was surpassed easily as the pair gained nearly 80 pips after U.S. equity markets rallied on Bernanke's comments regarding the government's new stress-tests for the banks.
The Cad (Usd/Cad) was not able to create a sustainable trend in the overnight session. In both the Asian and the European sessions, the cad had been unable to break out of the range seen during yesterday’s U.S. session. On the upside, the 1.2500 area acted as a resistance, while on the downside, the neutral pivot point (1.2470) acted as a support level. That level was broken decisively after Bernanke spoke and crude futures gained about 90 cents (2.42%) on the day.
The Swissy (Usd/Chf) traded flat in the Asian session, but started to move lower after the London open. Until now, the swissy has declined nearly 100 pips, paring the gains seen just one day earlier. The pair fell steadily in N.Y. after Bernanke provided his measure of clarity, but will need to take out the 1.1460 level before a stronger move to the downside can be seen.
The Swiss Consumption Indicator fell in January. The indicator declined to 0.99, showing the prospects are becoming increasingly gloomy. Due to the economic downturn, unemployment is set to rise in the coming months, which will have a negative effect on consumer spending
The Yen (Usd/Yen) gained almost 100 pips in the overnight session, helped by the positive S&P futures. However, the link between the two has been lost, to some extent, since the yen is trading near a 12-week high and the S&P has dropped to the lowest point since 1997. The pair rose in N.Y. as stocks traded flat early, then continued its ascent when equities took off after Bernanke helped alleviate fears regarding the possibility of bank nationalizations.
The corporate services price index fell to -2.2 percent for the month as commodity prices tumbled and a deepening recession caused companies to slow spending. Advertising agencies have been especially hard hit as demand wanes. Consumer prices in Japan have fallen for the first time in more than a year this January.