THE TAKEAWAY: USD Federal Reserve Chairman Ben Bernanke testifies to congressional testimony regarding the state of the US economy > Overtly dovish tone, but for the fact that an improvement in key data could provoke a tapering of QE3 > USDOLLAR BULLISH
Federal Reserve Chairman Ben Bernanke took to the hill today to respond to questions in front of a congressional testimony, the first of two key events revolving around the Fed today (at 14:00 EST/18:00 GMT, the May FOMC meeting Minutes will be released). The prepared statement from Fed Chairman Bernanke was quite dovish, leading to a bit of risk taking in US equity markets and consequent selling of the US Dollar.
On the labor market, specifically:
“Despite this improvement, the job market remains weak overall: The unemployment rate is still well above its longer- run normal level, rates of long-term unemployment are historically high, and the labor force participation rate has continued to move down.”
However, Fed Chairman Bernanke’s first remarks were completely erased from the collective memory once the Q&A portion of the testimony began. Right off the bat, the first question was about the pace of the Fed’s purchase. Several minutes later, Chairman Bernanke said that the pace of QE3 could be slowed over the course of the “next few meetings,” sending equity markets into a tailspin, and the US Dollar surging across the board.
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) 5-minute Chart: May 22, 2013
Charts Created using Marketscope – prepared by Christopher Vecchio
Following the start of the Q&A segment, the USDOLLAR rallied from a low of 10759 to as high as 10852, as the USDJPY hit a four and a half year high above 103.60.
--- Written by Christopher Vecchio, Currency Analyst
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