Bernanke Hints Rate Cuts

In testifying before the Senate Budget Committee, Ben Bernanke, Chairman of America's Federal Reserve Bank, hinted strongly that further rate cuts would be necessary to stabilize the US economy.  Last week, the Forex Blog covered an editorial which suggested that Bernanke knew something about the state of the economy that the American public did not, which his testimony seemed to confirm.  Bernanke testified that the Fed is also committed to fighting inflation, but the emphasis was clearly on spurring economic growth. As a result, futures markets are pricing in a rate cut of 50 basis points, projected for the next month.  The forex markets were unambiguous about the implications of this development for the Dollar.  Thomson Financial reports:

'By highlighting the downside risks to growth, Bernanke confirmed prevailing aggressive rate cut speculation, which currently keeps the dollar under broad pressure,' said Antje Praefcke, currency strategist at Commerzbank.

Read More: Dollar remains under pressure following Bernanke's testimony