US Dollar Unmoved by Yellen Speech, EUR/USD Downtrend Still Valid
- The Fed Chair gave what will be one of her last public speeches from the helm
- She said that the Fed was close to its inflation and employment targets
- Gradual policy tightening was key, she said, sticking to her usual script
The US Dollar was steady against the Euro and other majors Wednesday as Federal Reserve Chair Janet Yellen made one of her last public speeches from the helm of the central bank.
Speaking at the Stern Business School in New York, Yellen said that the Fed was “reasonably close” to its goals and should keep raising interest rates gradually. She spoke a day after announcing her retirement, which is expected to take effect in February 2018.
Yellen said that raising rates was key to dealing with any potential future negative economic shock, but that doing so too slowly risked over-tightening the labour market. She also said that the Fed sought to avoid the “boom and bust” patterns of the past.
All up there wasn’t a lot of news for markets to grip onto here, and the prospect of an interest-rate increase next month remains extremely bright. With that all-but nailed down to the markets’ satisfaction, the burning question is how many might follow it. Yellen offered little insight here beyond saying that there will be more, but that they will be gradual. This is an old line now, and got little reaction in the markets.
A bullish Goldman Sachs said Tuesday that a tight labour market and rising inflation will see the Fed raise rates four times in 2018, as long as Congress can pass tax reform.
On its broader, daily chart, EUR/USD remains trapped in a downtrend from this year’s peaks.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter:@DavidCottleFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.