The US dollar is weaker today ahead of Fed Chairman Ben Bernanke's semi-annual testimony to congress. The testimony is expected to address last week's discount rate increase of a quarter percent, and further reiterate that benchmark rates will stay low for an extended period of time in order to support the growth of the economy. For the past week, the dollar rallied on the suspicion of the government's action to tighten credit. If investors start to reduce bets on the Federal Reserve's decision to raise benchmark rates, the dollar may likely reverse its previous gains.
The euro saw some relief today as it strengthened close to half a percent against the US dollar. The euro's gain was supported by positive new industrial orders (up 0.8 percent in December versus a decline of 1.0 percent forecasted). Furthermore, November's estimate was revised up to 2.7 percent from 1.6 percent. Scheduled for tomorrow, Italian business confidence indicator will give market participants an indication of Europe's manufacturing sentiment. It is expected to be slightly higher than last month (survey of 83.6 vs. previous 83.2).
The British pound was little changed today, trading near yesterday's level of 1.5426. MPC member Adam Posen spoke today and offered moderate optimism for the Sterling by suggesting that the currency will maintain its current levels and inflation over the next decade will not sustain. On Friday, UK's second Q4 GDP estimate will be released, with a forecast at 0.2 percent compared to last week's 0.3 percent.
The Japanese yen is trading at a one-week high against the US dollar, up a total of 1.64 percent this week on risk aversion. Merchandise exports grew 40.9 percent in January - the fastest pace in 30 years, suggesting that deflation in the world's third largest economy may be waning. Ahead tomorrow, industrial production for January is expected to fall to a 1 percent increase versus a 1.9 percent increase in December.
The Canadian dollar is trading near yesterday's close of 1.0565 against the US dollar after a 1.3 percent drop from yesterday. The Loonie is yet to recover due to low crude oil and commodity prices. As a commodity-linked currency, the Canadian dollar is closely correlated to the price of crude oil, currently trading at 78.90 per barrel. On March 2nd, The Bank of Canada is scheduled to issue its monetary policy, which will set the tone for the Canadian dollar going forward.
The Australian and New Zealand dollars maintained their levels today after significant losses from the second half of yesterday's New York trading session. Australia's wage growth data from Q4 showed a 0.6 percent versus the 0.8 percent increase forecasted, currently at the lowest quarterly rate growth in almost a decade. The disappointing data pushed the two South Pacific currencies to almost a one-week low against the greenback.
10-Year Treasury Note Yield: 3.6702%
Dow Jones Industrial Average: 10363.88 -81.45