The dollar is gaining ground against all of its major competitors on Wednesday. The U.S. currency has been rising against the Japanese Yen and the pound sterling for the majority of the session and reversed early losses against the Euro after Fed Chairman Ben Bernanke began his testimony before the Joint Economic Committee of Congress.
Federal Reserve Chairman Ben Bernanke on Wednesday downplayed speculation that the central bank is planning to taper its $85 billion monthly bond buying program.
The economic recovery remains too fragile to proceed without extraordinary support from the Fed in light of fiscal restraint and headwinds from Europe, Bernanke said in semi-annual testimony before the Joint Economic Committee.
"A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further," Bernanke told lawmakers.
He assured that policy makers are ready to scale back the QE3 program if presented with data showing sustainable improvement in the labor market. "The key to this program is the data," Bernanke said.
St. Louis Fed President James Bullard and New York Fed President William Dudley said Tuesday that there is no case yet for curtailing bond purchases, given low inflation and mixed signals for growth prospects.
The dollar fell to a low of $1.2997 against the Euro on Wednesday, but has since sharply reversed to around $1.2885.
The euro area current account surplus surged to EUR 25.9 billion in March largely due to an increase in trade surplus, the European Central Bank reported Wednesday. The current account surplus amounted to EUR 14.6 billion in February.
Bank of England Chief Mervyn King maintained his call for more stimulus for the fourth month and was defeated again by a majority of six members as in previous months who cited faster-than-expected growth and pipeline impact from previous stimulus.
At his penultimate meeting, King along with Paul Fisher and David Miles sought an increase in quantitative easing by GBP 25 billion to a total of GBP 400 billion, the minutes showed Wednesday.
They said the case for additional stimulus was more compelling. "Further asset purchases now would facilitate an earlier normalization of the monetary stance when that became appropriate," the minutes showed.
But most members said the effects of the previous round of asset purchases were still coming through and, together with the extended Funding for Lending Scheme, should continue to boost activity.
The International Monetary Fund on Wednesday warned that fiscal consolidation in the U.K. will be a drag on economic growth. Given the weak growth prospects, it should adopt policies to re-balance the economy.
The economy is still a long way from "a strong and sustainable recovery," the IMF said in the concluding statement of its mission to the U.K.
The greenback has extended yesterday's gains against the pound sterling on Wednesday and has risen to around the $1.5050 level, its highest level since early April.
Retail sales in the UK declined unexpectedly in April, the latest figures from the Office for National Statistics showed Wednesday.
Retail sales volume, including auto fuel, fell 1.3 percent month-on-month in April against forecast for a 0.1 percent increase. Sales, excluding fuel, dropped 1.4 percent compared with an expected 0.1 percent growth.
The U.K. budget gap, excluding interventions, totaled GBP 6.3 billion in April compared to a surplus of GBP 19.1 billion in the prior year, the Office for National Statistics showed Wednesday. However, the deficit was below the consensus forecast of GBP 8.5 billion.
The Bank of Japan on Wednesday decided to keep its ultra-loose monetary policy unchanged, as expected, suggesting that the bank is moving cautiously amid concerns over the recent turmoil in the bond market.
Reaffirming its latest easing measures, the policy board said the bank will conduct money market operations so that the monetary base will increase at an annual pace of about JPY 60-70 trillion.
Meanwhile, the policy board upgraded its assessment of the economy, a couple of days after the Cabinet Office raised its economic view citing improving exports aided by the weak yen.
The BoJ said that the economy has started to pick up, while exports have stopped decreasing with overseas economies moving away from deceleration phase. According to the central bank, overseas economies are heading towards a pick up.
The buck has been rising against the Japanese Yen throughout the session Wednesday and has broken out to Y103.603, its highest level since October of 2008.
Japan posted a merchandise trade deficit of 879.936 billion yen in April, the Ministry of Finance said on Wednesday - slipping into the red for the ninth consecutive month. The headline figure missed forecasts for a shortfall of 620.6 billion yen following the downwardly revised deficit of 364.0 billion yen in March.
Existing home sales in the U.S. saw a modest increase in the month of April, according to a report released by the National Association of Realtors on Wednesday. NAR said existing home sales climbed 0.6 percent to a seasonally adjusted annual rate of 4.97 million in April from an upwardly revised 4.94 million in March.
Economists had been expecting existing home sales to rise to an annual rate of 5.0 million from the 4.92 million originally reported for the previous month.
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Forex News
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.