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Risk gained ground against the greenback on the back of Mr Bernanke’s comments regarding the pace of asset purchases going forward. While this was nothing new to the market; he emphasised the fact that asset purchases are by no means on a pre-set course and could in fact increase should conditions not improve.
What was also made clear was that scaling back would not necessarily be followed by tightening anytime soon. As a result, the USD was on the back foot following the comments, as risk took advantage of this and pushed higher. However, this all changed after Mr Bernanke reiterated the comment that he still feels tapering will start later this year and end next year.
AUD/USD pushed to a high of $0.929 where it found resistance before dropping back to $0.924. On the local economic calendar we have the conference board’s leading index and NAB quarterly business confidence due out. Currencies are looking quite choppy at the moment with investors just struggling to pick a direction from Mr Bernanke’s comments. As a result, the Fed chief certainly seems to have struck the right balance.
GBP/USD outperformed the risk space as it reversed higher on the back of the BoE minutes and stronger than expected UK employment data. EUR/USD is sidelined at 1.311 and USD/JPY is hanging around 99.75. Focus will remain on the USD as Mr Bernanke testifies again, this time in front of the Senate, and we feel he’s likely to reiterate what he said in front of Congress. We also have the Philly Fed manufacturing index to look out for.