While the central banker reaffirmed his outlook that rates would remain low for an extended period, market participants were more focused on Bernanke’s other warning that the Fed would still have to tighten at some point to prevent inflationary conditions. US Dollar gains were then seen accelerating on a rise in risk aversion after fears over the outlook for Greece escalated once more. A combination of riots, another potential downgrade to the sovereign debt, and a UK Telegraph article reporting of Greece attacking Germany over its war atrocities, and accusing Italy of hiding debt, were all seen pressuring currencies, with the Euro dropping back towards its recent 2010 lows.
The deterioration in market sentiment and risk appetite has hurt the higher yielding antipodeans the most on Thursday, with Aussie and Kiwi standing out as the big losers. A better than expected Australian Q4 capex showing, has only helped to prevent Aussie from tracking lower than Kiwi on the day. Sterling has also come under pressure on similar themes, along with added internal pressures revolving around UK debt and election uncertainties. To add more fuel to the fire, talk of a potential trade deficit in China, and added concerns over the contagion from the Greek crisis into Spain, have not helped matters.
Looking ahead, Swiss employment data is due out at 7:15GMT, followed by the German unemployment rate (8.2% expected) at 8:55GMT. Eurozone M3 (0.0% expected) is then released 9:00GMT, just ahead of UK total business investment (0.1% expected) at 9:30GMT. Eurozone business climate is out at 10:00GMT, with UK CBI distributive trades capping things off at 11:00GMT. US equity futures are well offered, while commodities have also been weighed down on global macro economic concerns.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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