Dollar Rebound Short-Lived, Markets Stay In Range

The dollar's rebound attempt overnight was rather brief and markets are staying in range in the Asian session today. While Bernanke once again failed to provide any hints of additional easing, he did sound worried about the global economic outlook and unsatisfied with the pace of improvement in the employment market. The Fed is still expected to provide further monetary stimulus down the road but the questions remain regarding when and what kind of stimulus to provide. Bernanke will have his second part of the semiannual testimony today, in front of the House Financial Services Committee but might just repeat what he said yesterday.

In Europe, Greece Pasok leader Venizelos said that it's "nearly impossible" to gather EUR 11.5b spending cuts in 2013 and 2014 to meet the target of the EU/IMF bailout conditions. He said that the "difficulty was always there but now it is exacerbated by recession forecasts." Meanwhile, it's reported that the coalition government is seeking a bridging loan to cover the bond redemption in late August before securing extension of the bailout agreement.

A deal was reached between Finland and Spain on the bailout for Spanish banks. The Finnish finance ministry said that Spanish Deposit Guarantee Fund will provide Finland with collateral to limit risks for Finnish taxpayers in the issuing of loans to the stabilization program for Spanish banks. And in exchange Finland will abandon a part of the interested generated profit margin of the Spanish loans. Finland will contribute around EUR 1.9b to the Spanish banking bailout program, which could top EUR 100b. The collateral required would be at around EUR 0.76b.

Looking ahead, UK events would be a major focus in the European session. BoE minutes will reveal the discussion and voting behind the central bank's decision to keep rates unchanged at 0.5% and raise the asset-purchase target by GBP 50b to GBP 375b. The voting and debate on increasing the size of quantitative easing are particularly important, indicating how much and how quick would BoE add monetary stimulus considering that inflation has cooled a lot to 2.4% yoy in June, the lowest level since November 2009. Meanwhile, jobless claims in the UK are expected to rise 5k in June with unemployment rate unchanged at 8.2% in May. Swiss ZEW will also be released.

In the US session, Bernanke will continue his semiannual testimony to Congress and face questions from the House Financial Services Committee. New residential construction data from US will also be released. The Fed will also release the Beige Book economic report. Canadian dollar remained firm as BoC maintained tightening bias in its statement yesterday. BoC monetary report will provide more insights into policymakers' thoughts.