Big Ben Talks Down The Dollar

Friday’s surprisingly strong job report sent the dollar soaring (NYSE: FXE, FXB, FXA, FXY).  Skittish currency traders got the impression that the improvement in the job market might prompt the Fed to raise interest rates earlier than expected.  This prompted a nearly 5% decline in the price of gold (NYSE: GLD), as well as a decline in the price of oil (NYSE: DBO).  This morning all markets waited with bated breath to see what Ben Bernanke would have to say during his speech at the Economic Club of Washington.

As anticipated Mr. Bernanke cautioned the market not to jump the gun.  In the conclusion of his speech he said, “The improvement in financial conditions this year and the resumption of growth over the summer offer the hope and expectation of continued recover in the new year.  However, significant headwinds remain, including tight credit conditions and a weak job market.”  It is clear from the subsequent decline in the dollars and the rise in the S&P and gold and the markets got the message.  Its going to take more than a month’s worth of solid job data before Bernanke is going to turn his eye to inflation.

Garrett W. McIntyre