Janet Yellen’s scripted testimony to Washington’s Congress overnight reiterated a hawkish tone from the Fed Chair, raising the probability of a March rate hike to 23% during trade. Yellen set the markets expectation for three rate hikes this year and pointed to rising inflation and moderate economic growth as the drivers. “Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession” Yellen said. Concerning President Trumps policies, Yellen admitted they presented uncertainties.
The US Dollar Index gained on Yellens comments, reaching 1.0132 at one point, off a low of 1.0065 during the session. Ten out of the last twelve days in the index have been gains.
U.S. stocks also boosted to new highs with the S&P500 (+0.40%), Dow Jones (+0.45), Nasdaq (+0.32%). While currencies received some much needed volatility overnight, we’re regularly seeing good opportunities across major indices in Australia (ASX200), the US (S&P500, Dow Jones) and Asia (Nikkei) as inflation, growth, rates and stimulus talks from policy makers and central banks provide traders plenty of reasons to get involved in this asset group.
AUD/USD came under pressure on Yellens comments, reversing a particularly strong NAB Business Confidence number from earlier in the Asian session. A session high of 0.7696 and low of 0.7618 gave traders in this pair some hope of a range breakout. Stuck in a range for most of February, this ~80 pip move was a great opportunity for range traders who have been active in this market.
EUR/USD and GBP/USD came under pressure, both selling off immediately on Yellens comments – both markets have, for now, consolidated these losses and sit at lows last seen on 12th Jan and 11th Feb respectively.
US crude rallied 0.7%, while iron ore futures (-1.3%), steel futures (-0.3%) and copper (-1.3%) all trimmed some of the solid moves seen in the last two sessions.
Upcoming Major Economic Announcements
- 8:30PM GBP Unemployment claims & rate, earnings index
- 12:30AM USD CPI, Retails Sales
- 2:00AM Yellen Testifies for a second day
- 2:30AM Crude oil inventories
