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Yellen Inspires US Dollar to Push Higher, Hit 13-Year High

Yellen Inspires US Dollar to Push Higher, Hit 13-Year High

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar continues winning streak as Fed outlook turns more hawkish
  • Markets took Yellen comments as endorsement of steeper rate hike path
  • Lull in top-tier event risk may offer near-term retracement opportunity

The US Dollar traded broadly higher in overnight trade, rising alongside front-end US Treasury bond yields as Asian markets took their chance to price in yesterday’s comments from Fed Chair Janet Yellen. The central bank chief seemed to concur with investors’ thinking on the implications of a fiscal stimulus boost championed by President-elect Trump, saying such a move “could have inflationary consequences” that the Fed would “have to take into account”. Traders appeared to take this as an endorsement of the steepening in the priced-in rate hike path since the US presidential election and pushed on with gusto.

The Japanese Yen declined as stocks traded higher, picking up the lead from a rally on Wall Street and putting pressure on the anti-risk currency. The risk-on mood also helped lift the sentiment-linked Australian, Canadian and New Zealand Dollars against all of their top counterparts save for the greenback. The Kiwi outperformed relative to its commodity-bloc cousins, enjoying the benefits of being the highest yielder and having the most forgiving central bank policy outlook besides that of the Fed in the G10 FX space. Indeed, expectations priced into OIS hint markets now see a small chance of a hike next year.

Looking ahead, little seems to stand in the way of continuation for established momentum, suggesting overnight trade dynamics may carry through into the week-end. A lackluster offering of second-tier European and US economic data seems unlikely to offer the kind of news-flow that materially changes the markets’ mood. With that said, the lull may equally serve as a backdrop for a bit of profit-taking as traders digest recent volatility, generating a degree of retracement before dominant themes reassert themselves.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

0:00

NZD

ANZ Consumer Confidence Index (NOV)

127.2

-

122.9

0:00

NZD

ANZ Consumer Confidence MoM (NOV)

3.5%

-

1.6%

1:30

CNY

China October Property Prices

-

-

-

2:59

NZD

Retail Sales Ex Inflation (QoQ) (3Q)

0.9%

0.9%

2.3%

3:01

NZD

PPI Output (QoQ) (3Q)

1.0%

-

0.2%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

Germany PPI (MoM) (OCT)

0.2%

-0.2%

Medium

7:00

EUR

Germany PPI (YoY) (OCT)

-0.9%

-1.4%

Medium

8:15

EUR

ECB's Draghi Speaks at European Banking Congress

Medium

9:00

EUR

ECB Current Account SA (SEP)

-

29.7b

Low

9:00

EUR

Eurozone Current Account NSA (SEP)

-

23.6b

Low

9:10

GBP

BOE's Broadbent Speaks in London

-

-

Medium

10:30

EUR

Bundesbank's Weidmann Speaks in Frankfurt

-

-

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.0412

1.0538

1.0582

1.0664

1.0708

1.0790

1.0916

GBP/USD

1.2252

1.2348

1.2382

1.2444

1.2478

1.2540

1.2636

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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