ForexSpace.com - Fed Chairman Bernanke pointed to headwinds hampering the economy, yet didn't hint at additional money printing. And with quarterly 2013-2014 contracts recently up 2 to 3 BP, the central question in the minds of forex brokers and traders will be whether Bernanke and the Fed see enough growth to make progress in lowering the U.S. rate. Not wishing to state the obvious, the Fed boss nonetheless suggested there's little stimulus left in monetary policy, but he's clearly warning Congress if they don't get fiscal/regulatory houses in order soon, we could all be speaking Greek a few years down the road!

With his prepared statement safely delivered – and no horses having bolted - the arguably more interesting aspect of Big Ben’s appearance on Capitol Hill came with the customary Q&A session. Starting off with saying he's prepared to act to boost the United States economy, Bernanke stopped shorted of giving details. He also warned that the euro zone crisis poses a "significant risk" to the US economy.

Both of these statements seem to have disappointed slightly, and markets almost instantaneously pared earlier gains. Reading between the lines, it seems to me, at least, like the fed boss is admitting that the marginal usefulness of more QE is diminished, and that the real issue needing to be dealt with is this fiscal cliff. In other words, throwing the ball right back into the lawmakers' court. Bernanke said that the US Fed "has options it can consider". QE3 could be one of those options, he concedes, but it would have to be evaluated to see if it would lead to job creation. Nothing is "off the table", he says, although no decisions have been made.

Bring Out The Helicopter

In response to a question concerning the Greece situation, and the U.S.A., Bernanke said that he thought the U.S. and Greece are “extremely different economies. The cause of the crisis varies quite a bit from country to country,” continued the Fed chief. “Greece is a country which over-spent and over-borrowed. The U.S. is a large, diverse economy with deep financial markets...”

Bernanke went on to state he's "worked really hard" to make sure that US banks are resilient to shocks coming from Europe, such as the potential break-up of the single currency: “We are taking steps to make sure we're as well prepared as possible in the financial system,” he said.

As the dust settles from Bernanke’s words, and the reserve currency responds to China’s rate cut, the consensus among market participants speaking to this site is that the USD is likely to track higher throughout the week. Certainly, as the Fed continues to soften its dovish tone for monetary policy, the shift in central bank rhetoric should provide short-term support for the greenback. Thus, it may track higher over the remainder of the week as market participants scale back speculation for QE3.

The market will need to wait for the Fed's next FOMC meeting on 20 June to get a real reading on the Fed's intentions and odds are they are going to act in a manner that has been previewed by various and numerous statements released this week.

Drew Hillier. Editor