Bernanke's remarks at an international conference today sent the dollar higher and oil lower. After the big run-up of the EUR/USD, the trade cooled off to the lows of the last 5 days. Take a look at intra-day EUR/USD chart and see the sell off around noon:
Oil followed suit and the front month contract settled at $124.31 after Bernanke hinted the next Fed policy move will NOT be a cut.
Obviously it would be a mistake to start talking rate hikes right now in the face of still-poor housing data and lingering concerns over the financials (namely Lehman Brothers and Wachovia this week). Lehman, rumored to report a loss this quarter, found itself denying more rumors about the firm accessing the Federal Reserve's discount window. Shares of LEH fell close to 10% intraday. And thats just brushing the surface of the ongoing turmoil that the financial sector just can't shake. The clear yet subtle message from Bernanke today was enough to contribute to a red tape among the major indices.
It looks like the chairman is doing his best, intentional or not, to throw a dart at the short term oil bubble. Says Bernanke: "...households continue to face significant headwinds, including falling house prices, a softer job market, tighter credit and higher energy prices."
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