Alpesh Patel's NEWSLETTERPRO - How will Janet Yellen's speech affect major currencies' outlook?

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© Alpesh Patel

The week started off with a peaceful and uneventful trading session yesterday with the major currency pairs we monitor demonstrating low volatility.

The Euro remained pretty much stable for the entire day hovering around the 1.3650 area and only during overnight trading hours it popped above that to reach 1.3680. There was little in the news to drive the European currency anywhere and investors are waiting for this week’s important events before committing to any further moves.

The Pound also remained range-bound yesterday and held on to recent gains to stay above the 1.6400 mark. The Bank of England’s Inflation Report tomorrow will be the key focus for the British currency this week but we expect increased volatility today in the Pound, as well as in the Euro, as the new Fed Chairwoman will be delivering her speech to the House.

So, time has finally come to hear from Janet Yellen for the first time after she got the Fed job and investors regard her first speech as very important. The Fed Chairwoman will be addressing several issues on her speech and she will be answering lawmakers’ questions at the same time.

One of the key issues she’s bound to address is the recent slowdown in growth in the job sector. The 2 recent jobs reports missed the market’s expectations and especially the December reports shocked investors and harmed the Dollar’s outlook at that point. We’re very interested to hear whether she’s worried about this development. Although it’s almost certain that she will state that she’s not we will need to read between the lines and assess how much truth there is in that.

Also a very important issue is the tapering agenda and whether she will go ahead as rumored with regular $10b cuts every month. The US economic recovery is proving fragile from the moment the Fed pulled the trigger back in December and it’s of the utmost importance to listen how she’s planning on moving forward. Again, the most obvious answer will be that further cuts are data-dependant but her tone and any signs of optimism or concern will be reflected on the Dollar’s price.

Important news events today and tomorrow

The key event of the day will be Janet Yellen’s speech to the House in the US and we’ll be monitoring her remarks closely as the US lawmakers will be expressing their concerns over recent developments in the recovery efforts.

Yellen will be aiming to be very responsive to their questions but at the same time give away as much as possible as one of her primary mandates is to keep volatility to a minimum. However, her tone and probably the way she expresses herself are bound to reveal some of her thoughts and investors will want to move on this.

The rest of the day is empty of other important events and our focus will turn to tomorrow’s Inflation Report coming from the UK and this is also a key event for this week. We’ll be speaking about this in more detail in our report tomorrow.

Economic Calendar









Fed’s Yellen delivers Monetary Policy Report







FTSE 100


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