Yellen provides minor support for flagging USD

8 May, 2014

Matthew Boyle

For the most part yesterday was a relatively flat day for trading across the board with no real data of note released, other than the largely anticipated speech by FED Reserve chair Janet Yellen at 3pm. With the dollar losing ground rapidly and being most noticeably taken to 5 year highs for buying rates against a currently strong pound, traders and investors waited with baited breath for an indication as to the Dollars future and what resolution might be offered.

In testimony in front of U.S congress Yellen confirmed that the economy was on the mend, but that the FED were prepared to act should it falter. She mentioned that as long as inflation is moving towards the 2% target and the economy continues to improve that the FED would reduce the current Q.E programme in measured steps. In what was a slightly mixed message which also touched on external factors such as the Ukraine situation impacting U.S growth, the markets were initially slow to react with the EUR/USD pairing seemingly waivering.

However given the current USD weakness it did manage minor gains clawing back 30 pips against the Pound and 20 pips against the Euro. Albeit these gains were minor it might be seen as significant given the fact that in recent weeks it has for the most part only lost ground, so those of you with upcoming USD requirements may like to speak to your Currency Index broker today should the USD begin reclaim this lost ground.

Today’s trading is likely to be a lot more volatile with a number of more heavy hitting  data releases due.

This morning we have the BoE interest rate decision and Asset purchase facility data – both of which will almost definitely remain unchanged. However just after lunch all eyes will move towards Europe and the ECB as they release an Interest rate decision of their own, and slightly later their Monetary Policy statement. In recent weeks it has been suggested that Europe will require further Q.E, or in the least part an amendment to the current programme. Whilst it is suggested this is unlikely today it is not impossible, and certainly this would be a significant marker and could spell further joys for the Pound and the USD as both would no doubt quickly gain ground following such an announcement. However as we know that often the markets can move in anticipation, and add to that Mario Draghis often upbeat presentation of the Euro,  part of this fear may be priced in as we speak and as such no announcement could see GBP/EUR rates slowly trickle back down from the near on year highs we are currently seeing.

Lastly late this afternoon we have FED Reserve Chair Yellen speaking again, which will be very interesting given her slightly mixed messages yesterday. Given that the safe haven status of the U.S and USD are currently seemingly in tatters, much of the market will be watching this closely for any further indications of which way the USD rates are headed.

Elsewhere in the world and outside the major pairings the pound is continuing to enjoy strength across the majority of the board so those of you with requirements for more “exotic” currencies might also like to take advantage should the pound perhaps start to lose steam from what has been a few very strong months.

Speak to your CI broker today for some friendly and professional guidance on how to get the most out of your currency exchange; we can help you stay well informed and well ahead of the market.