US Dollar Sold as Fed Chairman Bernanke Talks Down Asset Sales

The US Dollar fell after Federal Reserve Chairman Bernanke said unwinding the central bank’s massive balance sheet would come “late” into a tightening cycle.

Talking Points

• US Dollar Sold After Bernanke Talked Down Asset Sales as Tightening Tool
• British Pound Unlikely to Find Volatility in Industrial Production Data
• Swiss Deflation Expected to Have Accelerate on Franc Increase in March

The US Dollar declined against all of its major counterparts after Federal Reserve Chairman Ben Bernanke said asset sales are expected happen “late” into the monetary policy tightening process. The central bank chief added that the Fed preferred to use the interest rate on excess reserves (IOER) as its principal tool for unwinding stimulus when the time to do so is at hand.

However, that approach has been painted as a less-impactful tightening technique by some skeptics including the Fed’s own Charles Plosser, President of the Philadelphia branch. It appears the markets opted to agree, interpreting Bernanke’s comments to mean that the greenback will find policy support slow to emerge even when the Fed eventually begins to reverse its accommodative posture.

UK Industrial Production figures headline a relatively lackluster economic calendar on tap in European trading hours. Expectations call for output to rise 0.4 percent in February, marking a narrow recovery after a 1.2 percent drop in the prior month. The result is unlikely to materially alter investors’ Bank of England policy outlook and thereby ought to carry relatively limited implications for the British Pound.

Meanwhile, Swiss CPI data is due to show deflation re-accelerated to the fastest pace in six months, which likely reflected a rise in the Franc amid renewed Eurozone crisis jitters (with Italy and Cyprus in focus). Indeed, SNB FX reserves rose to a record CHF483.3 billion, the Bloomberg Eurozone Financial Conditions Index (FCI) – a proxy gauge for the impact of the debt crisis in the currency bloc – fell to the lowest in five months, and EURCHF closed the month at the weakest level since November over the same period.

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Asia Session:

GMT	CCY	EVENT	ACT	EXP	PREV
0:00	NZD	QV House Prices (YoY) (MAR)	6.5%	-	6.3%
1:30	AUD	NAB Business Conditions (MAR)	-7	-	-3
1:30	AUD	NAB Business Confidence (MAR)	2	-	1
1:30	CNY	Consumer Price Index (YoY) (MAR)	2.1%	2.5%	3.2%
1:30	CNY	Producer Price Index (YoY) (MAR)	-1.9%	-1.9%	-1.6%

Euro Session:

GMT	CCY	EVENT	EXP/ACT	PREV	IMPACT
5:45	CHF	Unemployment Rate s.a. (MAR)	3.1% (A)	3.1%	Medium
5:45	CHF	Unemployment Rate (MAR)	3.2% (A)	3.4%	Medium
6:00	EUR	German Trade Balance (€) (FEB)	16.8B (A)	13.6B	Low
6:00	EUR	German Current Account (€) (FEB)	16.0B (A)	9.7B	Low
6:00	EUR	German Exports s.a. (MoM) (FEB)	-1.5% (A)	1.3%	Low
6:00	EUR	German Imports s.a. (MoM) (FEB)	-3.8% (A)	3.3%	Low
6:00	JPY	Machine Tool Orders (YoY) (MAR P)	-21.6% (A)	-21.5%	Low
7:15	CHF	Consumer Price Index (MoM) (MAR)	0.3%	0.3%	Medium
7:15	CHF	Consumer Price Index (YoY) (MAR)	-0.5%	-0.3%	Medium
7:15	CHF	CPI – EU Harmonised (MoM) (MAR)	-	0.3%	Low
7:15	CHF	CPI – EU Harmonised (YoY) (MAR)	-	0.1%	Low
7:15	CHF	Retail Sales (Real) (YoY) (FEB)	2.5%	1.9%	Low
8:30	GBP	Industrial Production (MoM) (FEB)	0.4%	-1.2%	Medium
8:30	GBP	Industrial Production (YoY) (FEB)	-2.8%	-2.9%	Medium
8:30	GBP	Manufacturing Production (MoM) (FEB)	0.4%	-1.5%	Low
8:30	GBP	Manufacturing Production (YoY) (FEB)	-1.4%	-3.0%	Low
8:30	GBP	Visible Trade Balance (£) (FEB)	-8600M	-8195M	Medium
8:30	GBP	Trade Balance Non EU (£) (FEB)	-3650M	-3280M	Low
8:30	GBP	Total Trade Balance (£) (FEB)	-2800M	-2362M	Low
13:30	-	IMF Releases World Economic Outlook Update	-	-	High

Critical Levels:

CCY	SUPPORT	RESISTANCE
EURUSD	1.2968	1.3079
GBPUSD	1.5213	1.5325

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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