Market Softer Ahead of Bernanke Testimony

Market Softer Ahead of Bernanke Testimony

By William Leys (Premium Client Manager, CMC Markets)

The Australian market is softer in morning trade, despite the modest gains posted offshore overnight.

It was a fairly muted session in the US, as investors await Ben Bernanke's testimony in Congress on Wednesday. The Federal Reserve Chairman's words will be closely scrutinised as the market looks to discern the future of the quantitative easing program. The question is whether or not the central bank is considering slowing its asset purchasing, given the recent spate of strong economic data.

Any insight gained from Bernanke's address could have a significant bearing on all markets globally. If there is any hint of a wind down in the near term, we could see the USD continue to strengthen at the expense of its currency counterparts, as well as commodities. Alternatively, renewed commitment to the program may curtail the recent trend of USD favour.

It's interesting to note how this current environment has changed dynamic of the AUDUSD relationship. Up until recently, the AUD was considered the risk-on currency, benefitting from a sound economic outlook. However, any positive developments in the US are now seen to bring the end of QE3 a little closer, and with it, a stronger USD.

Locally, the release of the Westpac/Melbourne Institute Survey of Consumer Sentiment has disappointed the market, but activity will likely be curbed pending Bernanke's testimony tonight.

ENDS

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