With no fundamental news on the economic calendar in Europe today, all eyes will be focused on Fed Chairman Ben Bernanke later today as he begins a two day testimony to the House Financial Services Committee and Senate Banking Committee in DC. Bernanke’s testimony will be on past, current, and future Fed monetary policy (interest rates), the state of the US economy, inflation and deflation, the housing and employment sectors, the deficit, sovereign debt monetization, future stimulus measures and the prospects for a sustainable recovery on Wall Street – so not much of interest!!!!
As always all the markets, will be waiting and watching, even more so today with the lack of other significant news, and therefore any reactions to the testimony could be volatile and unpredictable. If you remember it was back in the middle of March that Ben Bernanke’s comments, stopped the fall in equities and reversed the fortunes of the US dollar as a result. Whether you believe the green shoots theory, the equity markets have been in euphoric mood ever since, trading largely on sentiment and a good news feel, rather than on any tangible results or key fundamentals, with the FED supporting this ‘bubble’ with upbeat and positive statements, along with an upwards revision of the growth and inflation expectations. However, not all the members are on board the ‘optimism train’, with both Ron Paul and Jim Bunning being two dissenting voices. The key thing for today and tomorrow will be whether the overall sentiment of the testimony is more on the positive or negative side in terms of the future outlook for the US economy, with most of the markets taking their cue from his comments.
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