By CountingPips.com
The US dollar has traded higher today in the forex markets against the other major currencies while the US stock markets declined following the US Federal Reserve Chairman’s semiannual testimony in front of Congress. The dollar has advanced higher versus the euro for a second straight day while also gaining against the British pound sterling, Australian dollar, New Zealand dollar and the Canadian dollar. The American currency has lost ground to the Japanese yen
The largest economic event of the day was Fed Chairman Ben Bernanke’s testimony at Congress in which the chairman conveyed a cautious tone on the economy. Bernanke said that the US economy is expanding at a “moderate pace” with rising demand from households and businesses but stated that current high unemployment will be a drag on the economy. Bernanke expects it will take “a significant amount of time” to bring back jobs to the majority of unemployed and that the unemployment rate will likely still be above 7 percent by the end of 2012.
Looking forward, the Fed expects real GDP growth of 3.0 to 3.5 percent for 2010 with expectations of GDP growth increasing to 3.5 to 4.5 percent in both 2011 and 2012. As for possible continued quantitative easing programs from the Fed, Bernanke kept the options open saying “we remain prepared to take further policy actions as needed to foster a return to full utilization” while also reiterating the pledge to keep interest rates low for “an extended period”.
The US stock markets started trending down during the testimony and closed lower on the day. The Dow Jones industrial average fell by 109.43 points or 1.07 percent to level at 10,120.53 while the NASDAQ declined by 35.16 points to level at 2187.33. The S&P 500 decreased by 13.89 points or 1.28 percent and now stands at 1069.59.
In commodities trade, both oil and gold have been relatively unchanged on the day as oil stands at $77.44 per barrel and gold trades at $1191.60 per ounce.
Tomorrow provides a full economic calendar for the markets to digest with releases that include New Zealand consumer confidence, United Kingdom retail sales, Canadian retail sales, US weekly jobless claims, US leading indicators, US existing home sales and the second day of Ben Bernanke’s congressional testimony.
