Over to super dove Janet Yellen

<p>The dollar continues to trade on the back foot this morning against sterling and euro as risk remains constructive ahead of Federal Reserve nominee Janet […]</p>

The dollar continues to trade on the back foot this morning against sterling and euro as risk remains constructive ahead of Federal Reserve nominee Janet Yellen’s confirmation hearing before the Senate Banking Committee today.

It seems, however, that the tone has already been set following the release of a prepared text on the US market close on Wednesday. The market had been predicting that maybe the known dove may tone down her dovish stance today but this now seems very unlikely following the text that didn’t even mention the taper word. Instead it said that ‘a strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases.

I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.’ Despite this dollar bearish tone, the 1.3500 level in euro surprisingly remains intact as USD/JPY continues to threaten the 100.00 level which confirms a risk constructive bias.

The market seems to be at the mercy of central bankers, with the ECB’s executive board member Peter Praet reminding the market that the ECB will use all tools available to fulfil its mandate, including negative rates and the option of asset purchases.

There is no doubt that Yellen’s testimony will be the highlight today. Sterling bulls are focusing on UK retail sales data this morning following a robust jobs report yesterday and a hawkish inflation report. The Financial Times has summarised that a rate rise seems likely in 2014 if the UK continues to show sustained growth, inflation below 2% and an unemployment rate below 7%.

 


EUR/USD

Supports 1.3390-1.3340-1.3295 | Resistance 1.3500-1.3545-1.3565

 


USD/JPY

Supports 99.20-98.40-97.80 | Resistance 99.85-100.00-100.60

 


GBP/USD

Supports 1.6000-1.5925-1.5850 | Resistance 1.6065-1.6165-1.6205

 

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