Euro Breaks Mythical 1.50 as Dollar Takes a Beating, Will Bernanke Deal The Final Blo

[B]Talking Points

• Japanese Yen: Breaks Resistance at 106.50 on Broad Base Selling
• Euro: Breaks Mythical 1.50 On Expected Fed Rate Cuts
• Pound: Emergency Rate Cut Rumored
• US Dollar: Durable Goods and Bernanke on tap[/B]

Euro broke through the mythical 1.50 barrier as the dollar sold off throughout the overnight session after U.S. economic data and comments from Fed Vice chairman Donald Kohn, suggested that more rate cuts are forthcoming from the Fed. The European economic data that crossed the wires only strengthened the case for euro bulls as European money supply was stronger than expected at 11.5%, German import prices index rose 0.8% in January, and GfK consumer confidence printed unchanged at 4.5.

The European economy continues to show signs of decoupling as the money supply numbers suggests that the credit crunch isn’t affecting lending in the region as it has in the U.S. Also look for the ECB to continue their hawkish stance, as their inflation case was bolstered by rising German import prices and as consumer confidence showed signs of stabilizing. Now that the Euro has broken through the 1.50 barrier, the currency could continue to set new record highs as expectations are that interest rate differentials will continue to widen between the U.S and the Eurozone.

Fed Chairman Ben Bernanke is expected to reiterate Donald Kohn dovish sentiments when he speaks today, as economic data continues to signal that more work is needed to be done by the Fed. In contrast President Trichet recently reiterated his hawkish stance when speaking in Frankfurt, when he intimated that strong Asian demand will offset declines from the U.S.

U.K. GDP signaled that they have more in common with the U.S. than their European brethren as the economy grew at its slowest rate in more than a year as the credit crunch takes a toll on consumer spending. Rumors that a U.K. clearer was having trouble raising funds led to a selloff of the pound and rumors that an emergency rate cut by the BoE may be in store.

With durable goods and new home sales expected to print lower, Euro longs will make a strong case. However, the real event risk will come from Fed Chairman Bernanke’s report on the economy. Any signal that inflation, and for that matter, stagflation, is a major concern for the Federal Open Market Committee may lead to the dollar rebounding, as traders look to lock in profits.

After 1.50, what’s next for the Euro? Join us in the EURUSD forum