Yellen Fails to Move Dollar

Our prop desk is relatively quiet for now – we still have some profitable ongoing positions in play including the short S&P and long USD/CHF. We have also seen a long CAD/CHF trade opened, whilst some attempts are being made at playing a rally on the DAX.

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Janet Yellen’s speech last night had the potential to convey a lot, but the market failed to bite, with neither the greenback nor the US equity indices wavering from their recent course. Geopolitical risks remain high, with the French elections as well as the threat of military action both in the Middle East and against North Korea casting a shadow over markets, so today could well end up being one where many traders elect to remain on the sidelines – with one eye being firmly on risk mitigation ahead of the long weekend break.

Fundamental Analysis – Yellen Fails to Move Dollar


Last night, Janet Yellen made a speech that had the ability to hold some significance, given it was the first Fed statement since the payrolls fell short of expectations at the end of last week. The Fed’s stance may be unmoved – more interest rates are coming and leaving aside the new jobs created, the labour market is seen as at capacity. The reaction by the greenback to this news was however rather muted and it does seem as if the risk off trades continue to win out. Geopolitical uncertainty is driving cash to safe havens, leaving USD/JPY to drift lower, whilst gold continues to find favour. With the long weekend looming, more risk mitigation is to be expected and this in turn will likely continue to lend support here.

Oil prices are plotting a steady course higher as concerns mount over what happens next in the Middle East. The next big trigger here should be tomorrow’s meetings in Moscow by US Secretary of State Rex Tillerson, and the objective here must surely be to try an diffuse an already hostile situation. Failure to deliver is likely to drive oil prices higher, again with the market having one eye on its inability to trade out of positions over the long weekend break.

UK inflation data is set for release at 8.30am GMT today and the expectation here is that the figure will again come in above the 2% mark, raising speculation that the Bank of England will soon be forced to come in with a rate hike. With oil prices alone – in GBP terms – sitting around 50% higher than they were a year ago, it’s easy to see where the inflationary pressures are coming from. Cable certainly has the scope for some reasonable gains on the upside if it becomes clear that the Bank of England is running out of time.

German ZEW economic sentiment for April is set to be released at 10am GMT and further improvements are expected to be posted. EUR/USD is languishing at one month lows with the French election casting something of a shadow over sentiment and even if we do see a good print from Germany, the fact that the race to become President remains wide open – and that the outcome will genuinely mean something for the future of the European Union – even a bumper figure today is only likely to deliver a short term boost.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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