Big Ben testifies to Congress at 1400 GMT (10 am ET) and given yesterday’s comments from Dudley and Bullard, it would be a shock if Bernanke wasn’t dovish. It’s even possible that he emphasizes downside risks to inflation, which would be a hint at increasing QE purchases.
I think there is only one trade on Bernanke: Buying US dollar weakness.
Two instances in the past week, showed the resilience of the dollar:
- Last Thursday, initial jobless claims, housing starts and the Philly Fed were all much weaker than expected yet the US dollar barely weakened
- Yesterday, the dovish comments from Bullard and Dudley caused some momentary USD weakness but it has been quickly reversed.
The market is showing that on two types of bad USD news 1) weak economic news and 2) central bank dovishness the dollar can rally anyway. To me, this means we are in a powerful USD bull market.
If Bernanke manages to spook out some weak USD longs, it’s better to be a buyer.