Friday won’t see a single data release, but there’s plenty on the minds of investors as worries abound that the U.S. currency could lose its AAA-rating. In addition, two gloomy speeches from central bank officials Thursday evening brought the U.S. dollar down a notch overnight.
Back to the ratings worries: Over the past month, the U.S. dollar index has fallen from nearly 87 cents to 80.221, sparking concerns that S&P could drop its AAA-rating for the currency.
Federal Reserve chairman Ben Bernanke speaks to graduates of Boston College Law School at 2pm, but there’s no Q&A. Judging by his graduation speech to Harvard last year, there’s little potential for market-breaking news.
Elsewhere in the news: The Obama administration has been rather optimistic in its forecasts for a 2010 recovery, but Boston Fed President Eric Rosengren was more cautious when he spoke Thursday evening.
Even Pimco’s Bill Gross, a prominent bond investor, voiced such concerns, concluding that the U.S. would in fact lose the rating, but in a few years rather than in the coming weeks. Concerns were also sparked last week when the UK was warned by S&P to rein in deficits to maintain the AAA-status.
Rosengren said when the U.S. economy switches directions, a quick recovery will be hindered by high unemployment, weak banks, and a consumer wishing to increase savings. "My best judgment is that a rather slow recovery is likely," he said.
Meanwhile, Philadelphia Fed President Charles Plosser said he was worried that the government reaction to the economic crisis is threatening the independence of the Federal Reserve.
"When a nation's treasury or finance ministry and its central bank work too closely together, there is a clear risk that the government's spending will end up being financed by the central bank's power to create money," Plosser said on Thursday night.
Both speeches contributed to a sell-off in the U.S. dollar, and with no data on Friday the comments could sway the direction of equities on Friday. Just before 8:30 am, however, stock futures are actually up as another ratings agency, Moody’s, has reiterated its faith in its AAA-rating for the U.S.
S&P 500 futures are up 5.2 points, Dow futures have climbed 46 points, while and Nasdaq futures have risen 9.75 points.