Fed`s Yellen`s Semi-annual testimony was largely a reiteration of recent sentiment in which inflation is expected to remain subdued in the near term but is expected to rise in the medium term. Yellen also said that jobs and wage growth are expected to support income and consumer spending which will support growth. Perhaps the most dovish of her statement was regarding the volatility in the global markets since the DEC rate hike, which could dampen the FED`s outlook if it persists. Yellen`s testimony is set to continue today. US equities closed mixed after a volatile session, the DJIA finished down 0.62%, S&P 500 -0.02% and the NASDAQ finished up 0.47%. Today’s data out of the US comes in the form of Unemployment claims (expected at 287k) which will be watched for any deviations, a better than expected number could give the USD a much needed lift.
The GBP was weighed down by worse than expect Manufacturing Production figures (-.02% vs 0.1%) and any rate hike expectations are being firmly put to rest as major players see the BOE delaying rate hikes as the BOE may incorporate the new measures which can be granted by the Financial Policy Committee. The committee, charged with maintaining stability, has the power to intervene in markets, particularly the housing market, using various forms of intervention other than rates.
Australia is set to provide the only news in the Asian session, with RBA GOV Steven due to testify. Investors will be watching for any clues to the future of monetary policy in AUD, with a more dovish tone, likely to lead to a selloff in the AUD. Further data in the form of Home Loans m/m is also expected at 2.9%, a step up from the previous 1.8%.
OPEC released their monthly report with mixed data as they stated their outlook, which sees a decrease in supply form non-OPEC member and a slight increase from OPEC member, leaving markets a little bearish if anything. US Crude Oil inventories lifted crude as expectations were beat, inventories dropping by -754k vs the expected gain of 3200K, which was largely due to falling output out of the US. The bulls didn’t celebrate for long as Yellen`s dovish comments saw crude spike back down to session lows.