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Fundamental Report – April 9, 2013: US Dollar Lower After Bernanke Stimulus Comments

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The US Dollar is showing weakness in the early part of the week, as Fed Chairman Ben Bernanke said asset sales will not be expected until the latter part of the easing cycle (signalling a slow end to the Fed’s stimulus programs). The Dollar is trading lower against all of the majors, as we see some negative carryover from the lower Non Farm Payrolls number released on Friday. Bernanke’s speech also made mention of the fact that the Fed’s program is more inclined to use the Interest On Excess Reserves (IOER) as its main tool for reversing stimulus once the time is appropriate.

What we are seeing now is a short term response to a long term issue, as the selling pressure on the Dollar is a reflection of the wider expectation that stimulus programs will be slow to unwind and reduce the currency-weakening effects that typically accompany stimulus programs. The selling pressure in the Dollar has allowed the EUR/USD to retake the 1.30 handle, while the AUD/USD is once again threatening an upside break of psychological selling at 1.05. We have a relatively limited scheduled as far as economic data this week, so this is a trend that could continue for the next few days. One potential driver for the Dollar could be seen if we see negative headlines out of Greece, but without safe haven buyers there is little to suggest that the Dollar will see a reversal near term.

UK Industrial Production to Guide GBP

For fundamental news, the next piece of economic data will be seen with the UK Industrial Production figures. The data is expected to show a small rise of 0.4% for the month, which would be a fairly encouraging turnaround after the -1.2% decline that was seen previously. In Switzerland, CPI figures are expected to show that CPI rose to its highest levels in 6 months. The EUR/CHF fell to new lows for the year in March, so the figures will likely create some volatility in the CHF if numbers surprise to the numbers show a downside surprise. Last year, the Swiss National Bank established a price floor in the EUR/CHF at 1.20 so the next moves will be important for determining the likely trajectory for the pair in the month of April.

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