Daily Market Review: Bernanke's Efforts To Rescue The Economy

CBI Distributive Trades Survey (GB, 11:00 GMT)

CB Consumer Confidence + Fed Chairman Bernanke Testifies + New Home Sales (U.S, 15:00 GMT)

Federal Reserve Chairman Ben S. Bernanke’s efforts to rescue the economy could result in more than a half trillion dollars of paper losses on the central bank’s books if interest rates rise abruptly from recent levels. That sum is the difference between the value of securities in the Fed’s portfolio on Dec. 31 and what they may fetch in three years, according to data compiled by MSCI Inc. of New York for Bloomberg News.

The Bank of Japan may pack a bigger punch under Haruhiko Kuroda, an opponent of deflation who ran the nation’s currency policy and then built an international reputation leading the Asian Development Bank. Japanese Finance Minister Taro Aso told reporters yesterday Kuroda, 68, would be a “correct” choice as next BOJ chief, noting an international finance background.

U.K. government bonds climbed, outperforming their AAA rated German peers in the first day of trading after Moody’s Investors Service cut Britain’s top rank, as investors downplayed the significance of the downgrade. “What Moody’s said is old news,” said Stuart Thomson, who helps oversee $109 billion at Ignis Asset Management in Glasgow, Scotland. “It is behind the curve.” Elsewhere, Italy’s inconclusive election triggered renewed market jitters over Europe’s debt crisis as recession-scarred voters repudiated budget rigor and established former comedian Beppe Grillo as a political force.

EUR/USD: The EUR/USD was trading lower at 1.30522 at the time of writing fears of a victory for Berlusconi's party or even a divided parliament and a subsequent excess vote sent investors scrambling to avoid the euro. Trading seems a bit sticky on the Asian session ahead of the Federal Reserve Chairman Ben Bernanke semiannual testimony on monetary policy to the Senate Banking Committee today and a subsequent address before the House Financial Services Committee tomorrow. There are speculations that Bernanke will restrain concerns that the U.S. central bank's stimulus measures such as a USD85 billion monthly quantitative easing program will drive up inflation rates and increase prices of specific asset classes failed to seriously reduce the dollar's appeal. The U.S will also release the CB Consumer Confidence, which is expected to increase to 61.0 compared to 58.6 registered previously. The other event which market participants should closely monitor is the U.S New Home Sales data. The New Home Sales is expected to improve to 381K from 369K recorded previously. No major economic data is expected in the Euro area today. Investors should remain prudent as volatility is expected on the pair today. The resistance level is at 1.31378 and the support level is at 1.29978.
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GBP/USD: The GBP/USD was trading higher at 1.51844 at the time of writing on market correction after U.K. government bonds climbed, outperforming their AAA rated German peers in the first day of trading after Moody’s Investors Service cut Britain’s top rank, as investors downplayed the significance of the downgrade. However, investors should remain on the pair as the BoE Gov King will make a speech today. His comments may spark a short-term positive or negative trend. Moreover, UK will release its CBI Distributive Trades Survey, which is expected to come at 16 compared to 17 registered previously. A higher than expected reading should be taken as bullish for the GBP, while a lower than expected reading should be taken as bearish for the GBP. Later in the day, in the U.S, the Fed Chairman Ben Bernanke will testify on monetary policy to the Senate Banking Committee. There are speculations that Bernanke will restrain concerns that the U.S. central bank's stimulus measures such as a USD85 billion monthly quantitative easing program will drive up inflation rates and increase prices of specific asset classes failed to seriously reduce the dollar's appeal. The U.S will also release the CB Consumer Confidence, which is expected to increase to 61.0 compared to 58.6 registered previously. The other event which market participants should closely monitor is the U.S New Home Sales data. The New Home Sales is expected to improve to 381K from 369K recorded previously. Investor should stay focus on the market. A wait and see approach will be a good strategy on the pair. The resistance level is at 1.52707 and the support level is at 1.51299.
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Gold: The yellow metal was trading lower at 1591.212 at the time of writing on profit taking ahead of the Federal Reserve Chairman Ben Bernanke semiannual testimony on monetary policy to the Senate Banking Committee today and a subsequent address before the House Financial Services Committee tomorrow. There are speculations that Bernanke will restrain concerns that the U.S. central bank's stimulus measures such as a USD85 billion monthly quantitative easing program will drive up inflation rates and increase prices of specific asset classes failed to seriously reduce the dollar's appeal. The U.S will also release the CB Consumer Confidence, which is expected to increase to 61.0 compared to 58.6 registered previously. The other event which market participants should closely monitor is the U.S New Home Sales data. The New Home Sales is expected to improve to 381K from 369K recorded previously. Other news is that Gold’s price cycle has probably turned as the recovery in the U.S. economy gathers momentum and investment holdings collapse, according to Goldman Sachs Group Inc., which reduced forecasts for the metal. On the other hand, signs of increased demand in China and as political turmoil in Italy after an election spurred haven demand. Investor should remain prudent and adopt a wait and see strategy on the commodity. The resistance level is at 1609.472 and the support level is at 1574.625.