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Dollar Down as Yellen continues talking

As time passes by,Yellen’s words in the prepared statement and in the answers to questions sound different than the initial headlines which sent the dollar up. On one hand,  she does note the improvement in the labor market and the economy in general, and continues seeing through the fall in oil prices.  However, Yellen remains Yellen: dovish. So, even after forward guidance is removed, it does not imply an imminent rate hike. The Fed will not be locked into a hike.

The US dollar reverses its gains and trades at somewhat lover ground.  We have some volatility.

As Adam Button notes, the initial headline on Bloomberg said that guidance change to mean  liftoff possible at any meeting. This sounds like  it’s imminent. However,  she also said that new guidance does not necessarily mean an  a liftoff within two meetings. That’s already something totally different.

The general message remains the same: everything is data dependent.

At the moment, employment looks good and inflation does not look scary, but things could change, and not all data has been positive of late.

In addition, she said that the residual effects from the crisis will lead to looser monetary policy even after goals have been  achieved. This is not new, but yet another reminder: Yellen and the current composition of the Federal Reserve are dovish. They would rather risk the economy heating too much than throwing a span in its fragile wheels.

So, if  employment and inflation look good, a hike in June is still possible. But, market expectations for a hike in September  now seem more accurate.

More:  Further commodity currency gains versus USD could be limited

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.