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US Dollar Left Adrift by Yellen’s Speech, CPI Still Ahead

US Dollar Left Adrift by Yellen’s Speech, CPI Still Ahead

Christian Lewis, Contributor

Talking Points:

  • Fed Chair Yellen stays away from policy forecasts, offers little novel growth view
  • Reinvestment of balance sheet holds market interest after FOMC minutes last week
  • Consumer confidence and inflation figures from the US top event risk ahead

Keep up with all the latest market events – including CPI figures – on the DailyFX Economic Calendar

The US Dollar was little-changed following remarks from Fed Chairwoman Janet Yellen at the University of Michigan today. While Yellen did briefly touch on the group’s current policy stance - reiterating that the US economy is ‘pretty healthy’ and the gradual pace of rate hikes will allow the Fed to achieve a neutral stance - it appears the market was still holding out for more substantive statements from the Fed Chairwoman.

With the release last week’s FOMC minutes, it appears market expectations are focusing more on wording from or impetus around the central banks’ timing of reducing their balance sheet. Despite her colleagues’ reference to reinvestment of the massive stimulus program as recently as Bullard’s speech in Australia, the Chair decided to avoid the topic. Moving further into the week, we will get key data out of the United States that can weigh more directly on monetary policy, and possibly alter the outlook for balance sheet policy or simply alter the pace of rate hikes.

On Thursday at 14:00 GMT we get the University of Michigan’s Consumer Confidence survey with the knowledge that conviction has turned into considerable action over the past months. Closer to the bone for monetary policy though will be the round of March inflation statistics due this week. It starts with import and export price pressures on Wendesday, moves to producer-level inflation on Thusday, while the market’s favorite consumer price index (CPI) due Friday at 12:30 GMT CPI – alongside advance retail sales figures.

Federal Reserve Chairwoman Janet Yellen:

  • Economy will continue to grow at moderate pace
  • Global economy is operating in more robust way
  • We’re close to reaching our objectives
  • We must sustain progress that we have achieved
  • Appropriate stance of policy is closer to neutral
  • Assessment of neutral interest rates in pretty low
  • Gradual pace of hikes can get Fed to neutral stance
  • Fed wants to avoid being behind the curve on rates
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