Dollar jumps after Bernanke's speech

The Dollar jumped on the early trading after the Federal reserve Chairman Ben Bernanke said the Central Bank will strongly resist any surge in inflation expectations. The US currency traded at 106.78 against the Yen and at 1.5585 against the Euro at 7:00am GMT. Bernanke also stated that the latest rise in energy prices added to the dangers from inflation and that the risk of a substantial economic slowdown receded last month, convincing more investors that the Fed can increase interest rates later this year.

The speech from the Fed chief, as well as ECB stating that an increase in borrowing costs could take place next month, are a sign that top Central Bankers are trying to limit the inflation impact from hiking oil prices to near $140 a barrel. “The Fed is looking for a fine balance in dealing with a weak economy and threat to inflation,'' said Gary Schlossberg, senior economist at Wells Capital Management Inc. Bernanke's speech ``certainly increases the odds that the next move will be a rate increase,'' he said.

The British Pound slumped yesterday, after Royal Institution of Chartered Surveyors showed that the UK’s housing market sentiment improved slightly in May, with prices dropping at almost their fastest pace in 30 years; the number of residential property agents and surveyors saying prices fell exceeded those reporting gains by 92.9 percentage points. The Pound traded at 1.9663 against the Dollar and at 0.7928 against the Euro at 7:00am GMT.

The Australian Dollar slide the most in 11 weeks against the US Dollar after the Ben Bernanke’s speech; the Aussie traded at $0.9488 at 7:00am GMT. The Australian Dollar slump was also supported by a government report that showed home-loan approvals slide for a third month in April, signaling the two rates increase this year are slowing the economy. The New Zealand Dollar was also pushed down by the Fed Chairman’s comments, slumping to near a four-month low against the American currency. The kiwi traded at 0.7561 against the Dollar at 7:00am GMT.

Today investors will be paying attention to the release of Industrial Production m/m in the UK, which is expected to slightly increase, pushing the Pound up. In the US, Trade Balance is forecasted to decrease to -59.5 billion, down from -58.2 billion, pressuring the Dollar down. The Canadian Trade Balance will also be revealed today, which is predicted to increase to 5.7 billion, up from 5.5 billion, boosting the nation’s currency. To finish, Bank of Canada will release its interest rate decision; borrowing costs are expected to decrease from 3 percent to 2.75 percent.