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Dollar Slides as Investors Watch Yellen Testimony

14 Juillet 2017

The bottom line here is central banks are no longer diverging from the Fed, and albeit on different trajectories, it seems a coordinated move towards tighter policies, which is likely to narrow the spreads in fixed income markets and keep the dollar under pressure.

Describing a healthy and steady-growing American economy, Yellen told USA lawmakers on Wednesday that "gradual" increases in interest rates would be sufficient. The present job gains would continue supporting the growth in incomes, thereby consumer spending. By contrast, BoE deputy governor Ben Broadbent was more dovish in his recent speech. Odds for additional hike this year are now close to 40%. Japan will release an Industrial Production report early on Friday.

Trump said that he spoke with Yellen in the White House and that she was not "toast" when her term ends.

The Bank of Canada's increase is the first by a G10 central bank outside the Fed since the Reserve Bank of New Zealand raised rates three years ago.

The United States is benefiting from other countries' stronger growth.

She further said that the favourable financial environment, along with the prospects for further gains in local as well as global spending and the current revival of drilling activity, should continuously support the business investments. "We're watching it very closely and stand ready to adjust our policy if it appears that the inflation under-shoot will be persistent".

Sterling was up 0.4 percent on the day at $1.2925.

Unemployment in the United Kingdom fell to a 42-year low in the three months to May, figures out today showed. Unemployment is down to 4.4%. The decline in the yield from the 10-year Treasure by 2.30% helped on fending off some potential losses the greenback could've experienced.

The dollar index rose 0.11 percent, with the euro down 0.42 percent to $1.1417.

Another data showed that retail inflation fell in June. The euro gained, erasing most of yesterday's losses on the back of falling bond yields.

Oil prices wavered early Wednesday, but recovered after a report showing that US crude-oil inventories declined sharply last week. Following the release, WTI was trading at $46.48 a barrel and Brent was at $48.29.

By 0740 GMT, the dollar index was trading 0.2 per cent lower at 95.588, having hit an 8-month low of 95.464.

Dollar Slides as Investors Watch Yellen Testimony