Talking Points:
- Fed Chair Yellen's lack of confidence takes June off the table.
- UK officials will speak up plenty between now and June 23.
- With FX volatility edging higher again, it's the right time to review risk management principles to protect your capital.
In what was the highest rated event on the US economic calendar this week, Fed Chair Janet Yellen's speech yesterday afternoon in Philadelphia has proven to be anything but reassuring for the US Dollar. After Friday's abhorrent May US labor market report, markets quickly priced out the likelihood of the Fed raising rates in June; this was all but confirmed by Fed Chair Yellen.
While not wanting to get too worked up over one single data set, Fed Chair Yellen did offer a bit of concern when discussing the recent slowdown in US jobs growth, nothing that there has been a considerable slowdown in April and May. Likewise, on the other side of the Fed's dual mandate, she also expressed concern that longer-run inflation expectations had moved enough to the downside to warrant attention. Neither set of comments in context of the upcoming Fed meeting suggest that a hike is imminent.
With a lack of significant US economic data due out over the coming days, Fed Chair Yellen has left the greenback out to dry. There are no other Fed lifelines for the buck to look for; the Fed is now in its media blackout period until its June policy decision.
Elsewhere, the British Pound remains at the forefront as we inch closer to the June 23 referendum. Polls yesterday showed that the Brexit camp is gaining momentum, although it's worth pointing out that the online polls (one of which was released yesterday) have been skewed towards the Brexit outcome from the get-go.
Bias aside, it's clear that "leave" surrogates have been dominating British media recently, allowing Brexit to gain momentum; it boiled over today with UK Prime Minister Dave Cameron speaking at a hastily arranged press conference to try and calm the masses. While the British Pound has enjoyed the vote of confidence, this type of exogenous interference - a policy official speaking up to try and sway voters, and thus, financial markets - is very likely to persist and intensify over the coming weeks.
See the video (above) for technical considerations in EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CAD, and the USDOLLAR Index.
Read more: US Dollar in Trouble as Fed Window May be Closed Until December
--- Written by Christopher Vecchio, Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
