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FOREX: US Dollar Losses After Bernanke Speech May Be Short-Lived

By , Currency Strategist
29 August 2011 07:01 GMT

Talking Points

  • Yen, Franc and US Dollar Fall as Bernanke Speech Boosts Asia Stocks
  • S&P 500 Stock Index Futures Point to “Risk On” Environment Ahead
  • Busy Economic Calendar to Renew Fears of Slowing Global Recovery

The Swiss Franc underperformed overnight, with the Japanese Yen and the US Dollar also under pressure as Asian traders took their opportunity to price in Friday’s long-anticipated speech from Federal Reserve Chairman Ben Bernanke at the Jackson Hole, Wyoming central bankers’ symposium. The response mirrored the one witnessed on Wall Street, with shares rising at the expense of the safe-haven currencies, reflecting Bernanke’s optimism in the continuity of the US economic recovery despite the current slowdown as well as his pledge to bring forth additional stimulus if conditions turn particularly sour. The MSCI Asia Pacific regional stock index rose 1.6 percent.

Looking ahead, S&P 500 stock index futures point higher in overnight trade, hinting the trading dynamics noted in Asia are set to carry forward as European traders reflect on the positive aspects of Bernanke’s having closed in negative territory on Friday in the immediate aftermath of his comments and their absence of a promise of QE3. Diminished liquidity may compound the tendency toward reactive trading, with London markets closed for the summer bank holiday and New York coping with the aftermath of Hurricane Irene (although reports suggest transportation systems ought to be operational, so traders should be able to make it to their desks).

With that in mind, it is important to remember that the increasingly apparent global economic slowdown unfolding over recent months and likely to persist through the end of the year has not been dismissed by the Fed Chairman’s optimism. As such, the reprising of growth and corporate earnings expectations ought to resume its downward pressure on spectrum of risky assets. Indeed, a busy calendar of key leading growth indicators looms ahead this week, promising to remind investors of the headwinds still facing sentiment. US Personal Income and Spending as well as the Dallas Fed Manufacturing Activity gauge will the first of these releases and will cross the wires late into European trade afternoon.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:01

GBP

Hometrack Housing Survey (MoM) (AUG)

-0.1%

-

-0.1%

23:01

GBP

Hometrack Housing Survey YoY (AUG)

-3.7%

-

-3.9%

1:00

AUD

HIA New Home Sales (MoM) (JUL)

-8.0%

-

-8.7%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

-

EUR

German Consumer Price Index (MoM) (AUG P)

-0.1%

0.4%

Medium

-

EUR

German Consumer Price Index (YoY) (AUG P)

2.3%

2.4%

High

-

EUR

German CPI – EU Harmonized (MoM) (AUG P)

0.0%

0.5%

Medium

-

EUR

German CPI – EU Harmonized (YoY) (AUG P)

2.5%

2.6%

Medium

8:00

EUR

Italian Consumer Confidence Index s.a. (AUG)

101.9

103.7

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.4385

1.4616

GBPUSD

1.6258

1.6489

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29 August 2011 07:01 GMT