Cable has also traded in a choppy fashion in European hours. There has been little by way of fresh news this morning but ongoing concerns about the size of the budget deficit and the possibility that this week's Q4 GDP revision may show that the economy may have failed to drag itself out of recession in the final quarter (first estimate was +0.1% q/q), continues to weigh on sentiment in the pound.
The AUD has had a disappointing session vs the USD failing to hold above USD0.900 despite a strong performance for mining stocks. The gains vs the USD are being constrained by GBP/AUD which has hit a 25 yr low of 1.7179; putting 1.7000 in focus and by EUR/AUD which is edging closer to a 10 yr low at 1.5116.
Bernanke's speech on Wednesday promises to be the dominant event of the week. Given last week's benign US inflation data and disappointing Jan payrolls data he is very likely to repeat the call that rates will remain low for an extended period. If he does not, however, the USD is likely to be bid higher. That said, the likelihood that the Fed will be out of the rate hiking traps well before the ECB and the BoJ is likely to keep the USD underpinned into the spring.
This afternoon data release will be limited to the US Chicago and Dallas activity indices.
Jane FoleyResearch Director