Euro rebounds in volatile U.S. trading after brief selloff
The greenback initially strengthened against its major peers after Fed Chairman Ben Bernanke refrained from hinting at another round of quantitative easing, however, dollar surrendered its gains and fell broadly as investors positioned ahead of Bernanke's second round of testimony on Wednesday.
Although the single currency gained to 1.2313 in Asian morning, price briefly retreated to 1.2276 before rising to session high at 1.2317 in European morning. Euro retreated to 1.2271 as investors remained cautious ahead of Bernanke's testimony in Capitol Hill, however, price tumbled to an intra-day low at 1.2189 on dollar's broad-based strength after Bernanke refrained from hinting at another round of quantitative easing.
Later, euro pared intra-day losses and rebounded to 1.2299 on dollar's broad-based weakness as investors positioned for the next round of Ben Bernanke's testimony. The Federal Reserve Chairman will address the House of financial services committee on Wednesday.
In his testimony to the Senate Banking Committee, Bernanke said 'Fed prepared to take further action as appropriate to promote stronger recovery; seasonal adjustments account for part, but only part, of recent loss of momentum in job creation; Europe remains under significant stress with spillover effects to the rest of the world including U.S; Fed looking at a range of possible tools to address weakness in economy, including balance sheet steps or communications, shud more action be needed; unconventional monetary policy tools still do have some capacity to support the economy.'
The British pound rose to session high at 1.5677 in Asian morning before falling to 1.5610 after a report showed U.K. inflation unexpectedly slowed, stoking speculation the Bank of England will take further measures to stimulate the economy. Later, cable tumbled to an intra-day low at 1.5554 on dollar's strength post Bernanke's testimony, however, price rebounded in tandem with euro in New York afternoon to 1.5657.
UK CPI m/m and y/y were reported at -0.4% and 2.4%, lower than expectations of -0.1% and 2.8% respectively.
Versus the Japanese yen, the greenback strengthened in Asia and gained to 79.17 ahead of Bernanke's testimony, however, price fell to 78.94 in New York morning after Bernanke's comments. Dollar pared intra-day losses and rebounded to 79.14 before stabilising.
In other news, Spain's Central Bank Governor Luis Mara Linde says 'not foreseen that the ECB will buy Spanish bonds in next few weeks; ECB bond-buying not strictly needed for now, may be necessary in future.'
On the data front, German July ZEW Institute economic sentiment index comes in at -19.6 vs -16.9. Bank of Canada kept its rate unchanged at 1.00%. U.S. capacity utilisation was reported at 78.9% vs forecast of 79.2%.
Data to be released on Wednesday:
U.K. claimant count, MPC July's minutes, U.K. average earnings, Swiss ZEW index, US housing starts.