In what had to be one the most listless and boring trading sessions since the winter holidays the majors remained nearly motionless throughout the early morning European trade as market players awaited the testimony of Ben Bernanke. Neither the EUR/USD nor the GBP/USD nor the USD/JPY moved more than 30 points during either Asia or Europe trade making this the least volatile sessions of the year.

On the economic front signs of rebound were everywhere. Yesterday, in US, Retail Sales jumped a remarkable 2.3% versus 0.9% expected adding further support to the notion that the Fed will go to 5% rates by May of this year. One plausible explanation for such a large increase in retail was the unusually warmer weather in January which produced temperatures 8.5 degrees  hotter than normal and therefore significantly reduced heating bill expenses allowing for greater consumer spending. Whether dollar bulls have global warming to thank for their good fortune, remains to be seen. For the time being the economic backdrop continues to be favorable to the greenback although EUR/USD found substantial support in the 1.1850 region yesterday and may well stage a small bounce from here, especially if Dr. Bernanke paints a more subdued economic picture in his testimony. 

Meanwhile, data in UK and Japan also showed upside surprises with Japanese LEI printing a bit higher at 81.8% versus 80.9% projected. In UK - a total turnaround from last night as unemployment rolls actually shrunk by -2K  against expectations of a rise to 7.2K indicating that the UK economy may be seeing a rebound. Cable received a further boost from a BOE report on inflation which suggested that 2006 growth will be above average. The tone of the report was far more hawkish than the market expected and sterling rallied as  result just as we were going to press. 

Aside from the Bernanke testimony, today brings the ever important TICS report.  The market anticipates in flows of $76.2 Billion - more than enough to offset December's -$65 Billion Trade deficit. However, should the number surprise to the downside, it could trigger a nasty turn in the EUR/USD as the pair appears to be oversold and dollar longs may be spooked into locking in their recent gains.

Boris Schlossberg is a Senior Currency Strategist at FXCM.