Kantox currency report: dollar, at 3-week highs after Yellen’s testimony
The dollar surged across the board on Tuesday, after Fed Chair, Janet Yellen surprised the markets with an unusually hawkish rhetoric on her semi-annual monetary policy report to the U.S. congress.
Yellen affirmed that it would be “unwise” to wait too long to raise interest rates and added that the committee will need to hike rates in the upcoming meetings if employment and inflation continue evolving according to the expectations, leaving all options open for a March rate hike.
EUR/USD: 4-week lows at 1.0560. The euro stretched lower on Tuesday, weighed by dollar strength after Yellen’s testimony, to hit fresh multi-week lows at 1.0560. At London market opening times, the EUR/USD is trading at 1.0575.
GBP/USD: support at 1.2440. The pound attempted to pick up on Tuesday bit, once again was capped at 1.2550 and retreated to near-term support level at 1.2440. Over the last two weeks, the Pound has remained trading sideways within a 200-pips range around 1.2500. At London market opening times, the GBP/USD is trading at 1.2455.
USD/JPY jumps above 114.00. The dollar recovery from last week lows at 111.60 extended on Tuesday beyond 114.00 after Yellen’s speech, reaching two-week highs at 114.50 area. At London market opening times, the USD/JPY is trading at 114.50.
In the Calendar Today
At 09:30 GMT the focus will be on the ILO UK unemployment rate and the average earnings. The labour market showing resilient to Brexit uncertainty so far thus, we expect this event to be will be neutral to positive for the pound.
In the U.S at 13:30 GMT there is a string of macroeconomic data, with a special interest in the U.S retail sales and Consumer Prices Index data. Inflation is expected to have remained beyond 2%, adding pressure for the Fed to hike rates, which might push the dollar higher.
At 15:00 GMT we will be attentive Fed’s Yellen’s second testimony to the U.S. congress. The tone of the testimony is expected to be similar to yesterday’s, thus the main interest will be on the question and answer session.
09:30 GMT UK: ILO Unemployment Rate (3M) (Dec)
Prev: 4.8% Cons: 4.8%
13:30 GMT U.S: Retail Sales (MoM) (Jan)
Prev: 0.6% Cons: 0.1%
13:30 GMT U.S: Consumer Prices Index (YoY) (Jan)
Prev: 2.1% Cons: 2.4%
15:00 GMT Fed: Yellen’s speech