On Tuesday, Ben Bernanke, the Federal Reserve Chairman, in an address to the U.S. Senate’s Banking Committee, left markets disappointed with his vague comments that gave no clear indication that additional easing for the struggling U.S. economy would be forthcoming. His words initially sent the greenback higher, but traders later reevaluated and reversed direction, sending the Euro higher instead later in the session.
As reported at 11:25 a.m. (JST) in Tokyo, the EUR/USD pair was trading at $1.2292, coming off a 2-week peak of $1.2317 hit earlier. Markets will have another chance to hear Bernanke later today when he sits before the U.S. House of Representatives and presents his economic outlook.
One thing that Bernanke was clear on was that the U.S. recovery is hindered by the crisis in the Eurozone, the pace of which is sufficient cause for worry, and for analysts that was a clear sign more easing is on the way, though when that might be is still up for debate. Some analysts believe that besides hauling out QE3, the Fed might consider following the ECB’s lead by lowering their deposit rate to encourage banks to park excess funds with peers instead of the Fed.