Bernanke's speech did not hint at an estimated time of a rate increase, though one will be needed to tighten monetary policy after the excess liquidity provided by the central bank during last year's financial crunch. The U.S. economy is still in recovery mode with high unemployment at 10%. At this point in time, inflation concerns are slight and the chance of a rate increase in the near future is slim.
The remarks made by the Fed chief helped to boost the EUR/USD, ending a dollar rally that began on Friday after a better than expected U.S. Non-Farm Employment change. Friday's significant drop in the pair's rate required many traders to abandon their long positions in the pair, adding significant momentum to the downward price move. However, today the long term upward trend was seen as the EUR climbed against the dollar.
The pair is currently trading at 1.4840 after floating just below the 1.4800 prior to Bernanke's speech. Earlier in the day the EUR/USD was trading at its lowest level in the previous five weeks. The Pound also fell against the dollar, trading at 1.6452, down from an opening price of 1.6476.
The Canadian Dollar will come into focus during today's trading. The Bank of Canada will announce its decision on the overnight rate which is not expected to change, along with the release of the accompanying rate statement. The explanation may contain hints at the future direction of Canadian monetary policy. A dovish tone in the rate statement may continue to push the USD/CAD lower towards the 1.0400 level today.