London Session - October 9, 2009 5:53 AM

EUR/USD has traded sideways in European hours after the USD received a boost in Asian hours from comments from the Fed’s Bernanke.  The Fed Governor did little more but to state the obvious – that he would be ready to tighten policy when the economy improves to prevent the emergence of an inflation problem down the road.  But the very fact that he is considering the timing of the first rate hike was enough to excite the fx market into covering short USD positions.  His comments were given added momentum by those of White House Economic Advisor Larry Summer who repeated the Treasury’s commitment to its strong USD policy.  That said, the inability of the USD to maintain its upside momentum against the EUR during European hours reflects the fact that there has been no real change in the fundamental backdrop from yesterday.  While it is likely that the next Fed move will be a hike, it is possible that this may not be before Q3 next year.  Full text »