2 April 2008 - 21:51Market Commentary 4/2/08

Well Bernake did indeed do his worst, trying to talk down the dollar in his testimony today in Congress. It is no secret that the Fed has a weak dollar policy and that they are setting the policy not the Treasury Department. Even so the Dollar showed some moxie and continued to make headway in the New York session against many pairs. The ADP employment report which has garnered more attention and respect now that it has been around a few years showed an increase in jobs last month and this surprised many.  Even so the dollar lost ground against the euro and the Canadian dollar today. The larger move overall has been related to the carry trade pairs and this is also effecting USD/JPY and USD/CHF because of the sudden lack of demand for these two pairs. I would call this correction in the carry trade pairs like GBP/JPY healthy and that pair went all the way down t0 192 after being at 250 last summer. So really a 11 cent bounce is really not large in comparison. Anyways the carry pairs have calmed down for the evening but expect more volatility in the near future with them. Tomorrow’s big news with be the US non manufacturing report which is really important in this service based economy that our politicians and corporate leaders are trying to convince us is so good for us. A poor reading on it could really stymie dollar’s attempt to recover.  There was no surprise that Bernake would try to talk down the dollar, every trader worth his salt knew that. The economic data release is a much harder thing to predict. If it comes out weak like it is expected too you can also expect the dollar to be weak. I would recommend a wait and see approach here.