Dollar bulls rewarded as Yellen adopts hawkish stance

<p>Federal Reserve Chair Janet Yellen appeared to be less dovish than hawkish as she testified before the Congress yesterday. This would fit with the assessment […]</p>

Federal Reserve Chair Janet Yellen appeared to be less dovish than hawkish as she testified before the Congress yesterday. This would fit with the assessment that the Fed Chair is expressing the view of the FOMC and not her own view. There was justification for keeping rates lower, with comments such as ‘the recovery is not yet complete’. It was noted that the participation rate ‘appears weaker than one would expect based on the aging population and level of unemployment’ which also contributes to the ‘hidden slack’ theory. Dollar bulls were eventually rewarded with the acknowledgement that the job market has improved. ‘If the labor market continues to improve more quickly than anticipated by the committee’, rate hikes would occur ‘sooner‘ and be ‘more rapid‘ than currently ‘envisaged’.

NZD remained in the spot light overnight following another disappointing dairy auction from Fonterra yesterday as Q2 CPI missed expectations by 0.3%, coming in at 1.6% on the year. The data has resulted in the market now being far more balanced going into the RBNZ OCR decision next week, with some justifications for the Central Bank to pause on hiking rates.

Chinese data released overnight showed a mixed picture as GDP came in at 7.5% versus the 7.4% expected although retail sales data disappointed at 12.4% year-on-year versus the 12.5% forecasted. The euro continues to be the frontrunner in the ugly currency contest following a disappointing ZEW survey yesterday and market perception that the Espirito Santo Group would be unable to repay €847million of maturing debt due last night.

The UK economy will be the main focus this morning, with the release of UK employment data. US PPI and industrial production data will be released this afternoon along with the Bank of Canada announcing its latest monetary policy decision.




Supports 1.3530-1.3500-1.3480 | Resistance 1.3625-1.3650-1.3700



Supports 101.30-101.20-100.75 | Resistance 101.70-102.00-102.30



Supports 1.7100-1.7065-1.7000 | Resistance 1.7200-1.7285-1.7340

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