News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Breaking news

UK to Announce Vaccine Passports and WFH Guidance in Move to Plan B

US Dollar May Move More on Hawkish vs. Dovish Yellen Tone

US Dollar May Move More on Hawkish vs. Dovish Yellen Tone

Ilya Spivak, Head Strategist, APAC

Talking Points:

The Japanese Yen outperformed in otherwise quiet overnight trade as stocks declined, offering support to the perennially anti-risk currency. The Euro corrected lower having bested all of its G10 FX counterparts yesterday. The Canadian Dollar also edged down in a move that probably reflected protective pre-positioning ahead of the upcoming BOC monetary policy announcement.

From here, Congressional testimony from Fed Chair Janet Yellen is likely to take top billing. Traders will comb through the remarks for clues that may help close the gap between policymakers’ projected rate hike path and that of the markets. FOMC officials expect to raise rates one more time this year. Futures markets imply investors see the possibility of such an outcome at just 48 percent.

Much of the markets’ skepticism seems to be rooted in recently soft inflation data. June’s policy statement suggested that while the rate-setting committee is duly unsettled by weaker price growth, it expects the downswing to be temporary, leaving its baseline policy normalization plans intact. Recent PMI and ISM survey data suggests there is merit to this argument.

The central question now is whether Yellen will be able to talk the markets into a more hawkish posture. Doing so is critical if the Fed hopes to tighten without setting off unwanted volatility. Needless to say, the US Dollar is likely to rise if she is successful. Perhaps more interestingly, the currency’s response may be more muted if she falls insofar as that would match the already priced-in status quo.

Where will the US Dollar go in the next three months? See our forecast to find out!

Asia Session

US Dollar May Move More on Hawkish vs. Dovish Yellen Tone

European Session

US Dollar May Move More on Hawkish vs. Dovish Yellen Tone

** All times listed in GMT. See the full DailyFX economic calendar here.

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

To receive Ilya's analysis directly via email, please SIGN UP HERE

Contact and follow Ilya on Twitter: @IlyaSpivak

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

DISCLOSURES