Bernanke

The USDJPY has broken above the 106.42 level and squeezed higher.  The EURUSD is back below the 1.5600 level.  EURUSD approaches good support at the 1.5578 and 1.5563 level where the 100 and 200 hour moving averages are situated. 

The comments were not particularly dollar bullish but the market is interpreting them that way for now. 

The jobless jump in May will not influence the rate outlook going forward.  This is reported in the WSJ. 

The likelihood of a serious recession has fallen. 

Growth risks remain to the downside. 

The thought is the Fed is unlikely to raise rates in the near future.

• Activity in current quarter likely to be weak.
• Current headwinds offset by recent rate cuts
• Stimulus package provides support
• Less downside from housing
• Inflation has remained high reflecting increase in global commodity prices. 

Chairman Bernanke's comments on the US dollar yesterday reflected a change in heart on the Fed's position on the US dollar.  To print out the article, click on the PDF attachment at the bottom of the report.

Forex Analysis: The Fed's Change of Heart on the Dollar

The Fed Chairs comments were strong with regard to the US dollar.  The US Treasury is supposed to be the defender of the dollar.  Expect Paulson and Bernanke to speak more in unison going forward as the dollar is now a major focus for both. 

This is as expected.  Later in the day (1:30 PM NYT) Dallas Fed President Fisher speaks.  He is a voting member and his comments are expected to be on the economy.

At 10;00 the US Wholesale Sales data will be released. 

Highlights from Bernanke in front of Congress:

• `IMPORTANT' TO NOTE `DOWNSIDE RISKS' TO GROWTH
• FED WILL ACT IN `TIMELY MANNER' TO HELP GROWTH
• Bernanke Pledges Fed Will Act in `Timely Manner' to Help Growth
• REITERATES FED WILL PROVIDE `ADEQUATE INSURANCE'
• UPSIDE RISKS TO INFLATION GREATER THAN MONTH AGO
•  FED SEES INFLATION SLOWING AS ENERGY COSTS FLATTEN
• CITES SOME `PASS-THROUGH' OF ENERGY TO CORE PRICES
• FED TO CLOSELY MONITOR PRICES `IN MONTHS AHEAD'
• SAYS DATA SINCE JAN.
  

Expect volatile markets.

Federal Reserve Chairman Ben Bernanke will testify about the Monetary Policy Report before the US House of Representatives Committee on Financial Services, in Washington DC.  This is the first of a two day testimony on Capitol Hill. Tomorrow he speaks at the Senate. 

Bernanke has indicated that the Fed forecasts due next week will show slower growth than prior forecasts.  Says Fannie Mae and Freddie Mac need to raise more capital.  More than likely more subprime writedowns by banks.  Fed concern is ability of banks to offer credit.