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US Dollar Sold as Fed Chairman Bernanke Talks Down Asset Sales

By , Currency Strategist
09 April 2013 06:35 GMT

The US Dollar fell after Federal Reserve Chairman Bernanke said unwinding the central bank’s massive balance sheet would come “late” into a tightening cycle.

Talking Points

  • US Dollar Sold After Bernanke Talked Down Asset Sales as Tightening Tool
  • British Pound Unlikely to Find Volatility in Industrial Production Data
  • Swiss Deflation Expected to Have Accelerate on Franc Increase in March

The US Dollar declined against all of its major counterparts after Federal Reserve Chairman Ben Bernanke said asset sales are expected happen “late” into the monetary policy tightening process. The central bank chief added that the Fed preferred to use the interest rate on excess reserves (IOER) as its principal tool for unwinding stimulus when the time to do so is at hand.

However, that approach has been painted as a less-impactful tightening technique by some skeptics including the Fed’s own Charles Plosser, President of the Philadelphia branch. It appears the markets opted to agree, interpreting Bernanke’s comments to mean that the greenback will find policy support slow to emerge even when the Fed eventually begins to reverse its accommodative posture.

UK Industrial Production figures headline a relatively lackluster economic calendar on tap in European trading hours. Expectations call for output to rise 0.4 percent in February, marking a narrow recovery after a 1.2 percent drop in the prior month. The result is unlikely to materially alter investors’ Bank of England policy outlook and thereby ought to carry relatively limited implications for the British Pound.

Meanwhile, Swiss CPI data is due to show deflation re-accelerated to the fastest pace in six months, which likely reflected a rise in the Franc amid renewed Eurozone crisis jitters (with Italy and Cyprus in focus). Indeed, SNB FX reserves rose to a record CHF483.3 billion, the Bloomberg Eurozone Financial Conditions Index (FCI) – a proxy gauge for the impact of the debt crisis in the currency bloc – fell to the lowest in five months, and EURCHF closed the month at the weakest level since November over the same period.

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Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

0:00

NZD

QV House Prices (YoY) (MAR)

6.5%

-

6.3%

1:30

AUD

NAB Business Conditions (MAR)

-7

-

-3

1:30

AUD

NAB Business Confidence (MAR)

2

-

1

1:30

CNY

Consumer Price Index (YoY) (MAR)

2.1%

2.5%

3.2%

1:30

CNY

Producer Price Index (YoY) (MAR)

-1.9%

-1.9%

-1.6%

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

5:45

CHF

Unemployment Rate s.a. (MAR)

3.1% (A)

3.1%

Medium

5:45

CHF

Unemployment Rate (MAR)

3.2% (A)

3.4%

Medium

6:00

EUR

German Trade Balance (€) (FEB)

16.8B (A)

13.6B

Low

6:00

EUR

German Current Account (€) (FEB)

16.0B (A)

9.7B

Low

6:00

EUR

German Exports s.a. (MoM) (FEB)

-1.5% (A)

1.3%

Low

6:00

EUR

German Imports s.a. (MoM) (FEB)

-3.8% (A)

3.3%

Low

6:00

JPY

Machine Tool Orders (YoY) (MAR P)

-21.6% (A)

-21.5%

Low

7:15

CHF

Consumer Price Index (MoM) (MAR)

0.3%

0.3%

Medium

7:15

CHF

Consumer Price Index (YoY) (MAR)

-0.5%

-0.3%

Medium

7:15

CHF

CPI – EU Harmonised (MoM) (MAR)

-

0.3%

Low

7:15

CHF

CPI – EU Harmonised (YoY) (MAR)

-

0.1%

Low

7:15

CHF

Retail Sales (Real) (YoY) (FEB)

2.5%

1.9%

Low

8:30

GBP

Industrial Production (MoM) (FEB)

0.4%

-1.2%

Medium

8:30

GBP

Industrial Production (YoY) (FEB)

-2.8%

-2.9%

Medium

8:30

GBP

Manufacturing Production (MoM) (FEB)

0.4%

-1.5%

Low

8:30

GBP

Manufacturing Production (YoY) (FEB)

-1.4%

-3.0%

Low

8:30

GBP

Visible Trade Balance (£) (FEB)

-8600M

-8195M

Medium

8:30

GBP

Trade Balance Non EU (£) (FEB)

-3650M

-3280M

Low

8:30

GBP

Total Trade Balance (£) (FEB)

-2800M

-2362M

Low

13:30

-

IMF Releases World Economic Outlook Update

-

-

High

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.2968

1.3079

GBPUSD

1.5213

1.5325

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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09 April 2013 06:35 GMT