European Session – Dollar rebounds after Yellen signals continuity ion Fed tapering
February 11, 2014 2:58 pm
There were no fundamental data releases during the European session on Tuesday so the anticipation of Fed Chair Yellen’s testimony was the main market focus.
The dollar was predominantly weaker leading into Yellen’s first testimony since she took office on February 3, and was to appear in front of the House Financial Services Committee at the US Congress.
Following the release of Yellen’s prepared testimony at 1330 GMT in which she emphasized the continuity of the Fed’s monetary policy, the market’s initial knee-jerk reaction to these comments was to buy back the dollar since Fed tapering of its current bond buying program is viewed as dollar-positive.
Yellen also noted that the softness in inflation merely reflects “transitory” factors. She was also a little dovish in mentioning that the labor recovery is far from complete. However, Yellen added that the recent volatility in markets does not pose a substantial risk to the US economic outlook.
The dollar regained losses made against the euro earlier in the session when it had fallen to a near 2-week low and it also pared losses versus the pound.
As a result, the euro tumbled from a session high of 1.3682 to a low of 1.3631 following Yellen’s testimony, ending the session with a 0.07% loss at 1.3649.
The pound fell from a high of 1.6470 down to 1.6429 but still maintained most of its gains to end at 1.6443, up 0.16%. Meanwhile, sterling’s direction will be given by the Bank of England’s quarterly inflation report on Wednesday. BoE Governor Mark Carney is expected to sound dovish and to step away from the reliance on the 7% unemployment threshold.
The dollar was mostly steady against the yen for most of the session partly due to the Tokyo markets being closed for a holiday today but also because investors were being cautious on this pair ahead of volatility that would be caused by Yellens’ testimony. In a knee-jerk reaction to the release of the testimony, the dollar spiked up to 102.66 from a pre-testimony low of 102.32, to end with a 0.02% gain at 102.31.
The greenback also rebounded against the Canadian loonie from 1.1029 to 1.1060.
While markets will be focused on Yellen’s question and answer session at the House, focus will also be on an important economic data release – the JOLTS report is due at 1500 GMT. JOLTS stands for Job Openings and Labor Turnover Survey, and unlike the normal jobs report, it looks at things like how many people quit their jobs, and how many job openings went unfilled. However, this job survey has a lag of two months and may not have a big impact on the dollar.
There were no fundamental data releases during the European session on Tuesday so the anticipation of Fed Chair Yellen’s testimony was the main market focus.
The dollar was predominantly weaker leading into Yellen’s first testimony since she took office on February 3, and was to appear in front of the House Financial Services Committee at the US Congress.
Following the release of Yellen’s prepared testimony at 1330 GMT in which she emphasized the continuity of the Fed’s monetary policy, the market’s initial knee-jerk reaction to these comments was to buy back the dollar since Fed tapering of its current bond buying program is viewed as dollar-positive.
Yellen also noted that the softness in inflation merely reflects “transitory” factors. She was also a little dovish in mentioning that the labor recovery is far from complete. However, Yellen added that the recent volatility in markets does not pose a substantial risk to the US economic outlook.
The dollar regained losses made against the euro earlier in the session when it had fallen to a near 2-week low and it also pared losses versus the pound.
As a result, the euro tumbled from a session high of 1.3682 to a low of 1.3631 following Yellen’s testimony, ending the session with a 0.07% loss at 1.3649.
The pound fell from a high of 1.6470 down to 1.6429 but still maintained most of its gains to end at 1.6443, up 0.16%. Meanwhile, sterling’s direction will be given by the Bank of England’s quarterly inflation report on Wednesday. BoE Governor Mark Carney is expected to sound dovish and to step away from the reliance on the 7% unemployment threshold.
The dollar was mostly steady against the yen for most of the session partly due to the Tokyo markets being closed for a holiday today but also because investors were being cautious on this pair ahead of volatility that would be caused by Yellens’ testimony.
In a knee-jerk reaction to the release of the testimony, the dollar spiked up to 102.66 from a pre-testimony low of 102.32, to end with a 0.02% gain at 102.31.
The greenback also rebounded against the Canadian loonie from 1.1029 to 1.1060.
While markets will be focused on Yellen’s question and answer session at the House, focus will also be on an important economic data release – the JOLTS report is due at 1500 GMT. JOLTS stands for Job Openings and Labor Turnover Survey, and unlike the normal jobs report, it looks at things like how many people quit their jobs, and how many job openings went unfilled. However, this job survey has a lag of two months and may not have a big impact on the dollar.
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