mask Yellen’s Ballsy Tone Boosts the Dollar

15/ 02/ 2017

Yellen’s Ballsy Tone Boosts the Dollar

Daily Update - 15th Feb 2017

Yesterday’s Market

  • EUR Harmonised Index of Consumer Prices, Consumer Price Index, Gross Domestic Product, ZEW Survey – Economic Sentiment, Industrial Production
  • GBP Producer Price Index & Consumer Price Index
  • USD Fed Yellen's Testimony infront of Senate Banking Committee

Yesterday Explained

EUR/USD was little changed in Europe on Tuesday despite news that the Euro-Zone economy grew by 0.4% month/month in the fourth quarter of 2016 rather than the 0.5% originally estimated. Euro-Zone industrial output recorded its biggest fall in more than four years in December. Fresh data showed Eurozone economic growth was weaker than previously reported in the fourth quarter. U.K. consumer prices rose in January at the fastest annaul rate in 30 months, a sign of how the pound’s fall since last summer’s Brexit vote to leave the European Union is hitting the cost of everyday living.

Janet Yellen gave a fairly upbeat testimony to the Senate Banking Committee yesterday that fueled the dollar's growth. She said that the FOMC will continue to hike rates as long as the economy “continues to show signs of strengthening” and Waiting too long to raise interest rates would be "unwise" as economic growth continues and inflation rises.

Yellen’s tone to the newly elected Congress was definitely “ballsy”. It suggest that she will maintain the Fed’s independence, and will stand her ground when it comes to any risks that the Trump administration may (or may not) pose to financial and economic stability in the US. Her comments sent major rival currencies like EUR & GBP tumbling to 4 weeks low where EUR/AED slipped to 3.87 while GBP/AED fell to 4.57. Yellen called for diversity, but if Trump fills those spots with people akin to his own world view – low rates and lower dollar – then the path of Fed policy could change sharply going forward.

Today’s Market

  • EUR Non-monetary policy ECB Meeting & Trade Balance
  • USD Retail Sales, Consumer Price Index, Industrial Production, NAHB Housing Market Index & Fed’s Yellen's Testimony infront of House Financial Services Committee

Today’s Focus

First up will be Non-monetary policy meeting from European central bank which will be followed by Trade Balance from Europe which is the balance between exports and imports of total goods and services. Next up will be key data from USA on Retail Sales, Consumer Price Index, Industrial Production, & NAHB Housing Market Index. Finally day will round off with Fed Chair Yellen continuing her testimony before House Financial Services Committee on economy.