Forex today, dovish Yellen testimony, bullish Q&A, dollar down
Forex today was all about Yellen who delivered a relatively candid testimony, enough for markets to be concerned about anyway, with respect to future rate hikes, or the lack of for the time being.
In Yellen's semi-annual testimony before Congress today, she essentially reinforced what was already told to markets back in the previous Open committee meeting with respect to the themes for interest rate and balance sheet policy. Overall, traders can probably expect announcements in the September meeting around the balance sheet that could likely take effect in October, while in terms of interest rates, markets might have to wait until the end of the year again before the Fed are comfortable with their inflation target.
Elsewhere, the Beige book was positive and offered signs that the US could indeed be turning a corner after a dismal first half of the year, equating to a possible pick up of inflation towards the Fed's target, supporting the dollar into the close today.
DXY has been trading in a range of 95.511 - 95.980 and remains under pressure, albeit starting to correct off the lows, currently trading at 95.73 spot. US yields were closing down -1.81% having been in a range between 2.2999% and 2.3569%.
EUR reached a fresh year to date high of 1.1489 before settling at 1.1420 and down 0.41% on the day. GBP settles at 1.2880 +0.27% from 1.2812 lows on rosy jobs picture. Yen as at 113.18 by the close, having ranged between 112.93 - 113.97, -0.67%. USD/CAD was closing at 1.2738 and down - 1.37% and making for a 13 month low on a very hawkish outcome from the BoC and the rate hike. AUD was in a range of 0.7635 - 0.7685, up +0.52% on the day while the Kiwi was also up on the day, +0.48% at 0.7260.
Day ahead from Asia
- China Trade Balance USD Jun
- NZ Food Price Index MM Jun
- JP Foreign Bond Investment
- JP Foreign Invest JP Stock
Key notes from US shift
- Fed Beige Book: Most districts expect modest to moderate economic gains
- Fed's Yellen speech: Wage growth seems somewhat low given Fed 2% inflation objective
- BoC's Poloz speech: Will need to gauge carefully effects of higher rates on economy
- BoC: Recent softness in inflation is temporary
- UK unemployment rate ticked down to a new generational low of 4.5% - BBH