We are unwilling to buy into the dollar rally

Outlook: We have to follow the oil story today, again, but there is some support for the US dollar from the Bernanke speech yesterday as well as subsiding panic over Fannie and Freddie.

While we continue to get data this week, eyes are already turned to Bernanke’s semi-annual testimony next week (Tuesday and Wednesday). This is one time when it pays to watch the proceedings on TV, if only to see our legislators making fools of themselves.

The Tuesday speech will include the Fed’s revised quarterly economic projections, and all eyes will be on the recession/inflation indicators. Unless the Fed knows something about a potential fresh financial market meltdown that the rest of us do not (Lehman?), the Fed is getting behind the inflation curve.

Euro to US Dollar are probably stuck in a narrow range of 1.5600 to 1.5750 for the day. We need a breakout but it seems that oil lacks the power to provide it, at least not yet. We are unwilling to buy into the dollar rally until we see perception of structural and/or cyclical change. It might be brewing, but it’s not the consensus yet.

Bye for now

Barbara Rockefeller