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March 2016

Yellen’s testimony weighs on the Dollar

Published: Wednesday 30 March 2016

  • Yellen’s testimony weighs on the Dollar
  • US jobs data this week will be the focus
  • Pound shrugs off Brexit fears 
It was a generally quiet day yesterday as traders returned after the Easter break however the US Dollar came under renewed selling pressure as Fed Chair Yellen made some dovish comments speaking in New York. The Dollar was already under pressure after the surprisingly cautious Federal Reserve meeting when they suggested that interest rates would only rise a couple of times this year which was down from an anticipated 4 times at the previous meeting. After some positive rhetoric from other Fed officials, expectations have risen that rates would be lifted as early as next month. Yellen’s remarks yesterday have put an end to such speculation as it is clear that there is little appetite for a move and that the current financial uncertainty around the world justifies a slower path of rate rises.
The Pound has been particularly vulnerable to comments concerning the possible "Brexit" which has caused Sterling to lose ground as the leave campaign began to gather momentum.  The Bank of England has warned that a vote to leave the European Union risks a new credit crunch. They also said a leave vote could cause a run on the Pound and higher interest rates for mortgages. Although the Bank has deliberately not made any direct comment one way or another regarding the referendum, the statement from the Financial Policy committee will certainly assist Pro Europeans as they make a case for us to remain within the EU. The Pound gained on the news and is currently testing the recent highs.
The only data of note today is the ADP payrolls figure which is due later this afternoon. A weaker private jobs number will put further pressure on the Dollar which is already losing ground. The focus will then turn to Friday’s Non-Farm payrolls release which is always closely watched. Any number below 200k will be disappointing and will perhaps justify the Federal Reserve's recent caution over the future path of interest rates.

Young Constable

A newly graduated police officer is out for his first night shift with an older more experienced sergeant. As they drive along a main road, the young guy says, “There are a whole bunch of people loitering over there. If you stop the car, I’ll get them to move on.”
The sergeant pulls over and the youngster jumps out, puts his cap on and crosses the road with real purpose in every stride. The sergeant drops the window so he can hear what is going on.
He hears the young man assert his authority and after several “Come on, it’s time to move one,” and “Let’s be having you,” type comments, the group of people disperses and the constable returns to the car, very pleased with himself.
“That wasn’t too difficult,” he says, “but that big bloke looked like he might kick off. I’m pretty happy that they dispersed without too much complaint though.”
There was a period of silence while the sergeant pulled away in the car and re-joined the traffic.
“How did I do?” asked the young copper.
“Oh, you moved everyone on without incident and that’s good,” said the sergeant. “but I can’t help wondering if you are going to clear all the other bus stops in the same way.”
Market BST Data/Event Previous Expected
EUR 09:00 E19: Industrial confidence, index -4.4 -4.3
EUR 09:00 E19: 'Final' consumer confidence, index -9.7 -9.7
USD 13:15 US: ADP Non-Farm employment change 214 195
USD 15:15 US: Crude oil inventories 9.4 3.1

FX Research by Ricky Nelson

Daily Currency Analysis with Alastair Sweetman

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