Yellen Part 2 Is Over. Is The Market Missing Something?
The two day testimonial from FED´s Chairwoman Yellen before the Senate Banking Commitee in Washington is over, so what are we left now with?
The first part was aired yesterday and by the end of the Q&A session, the forex market formed an idea that the FED was being dovish, or at least not hawkish enough.
Today was aired the second part of the soap opera, so let´s have a quick look at the main comments.
- Labour market is pretty tight
- Monetary policy is not set in stone
- Fiscal policy is uncertain at the moment
- Yellen sees inflation risks as two sided
- She blames data plans for mobile phones and prescription prices for low inflation
- Yellen has reason to believe that expansion will continue
Really, data plans and prescription prices are what´s keeping inflation down and the US economy from going into fifth gear? Not automation and migration? I don´t think so.
Anyway, what the market is missing in my opinion is that there are no dovish comments in the testimonial. If the FED doesn´t see any risks for the economy, then the USD should be climbing higher.
But the forex market is too concerned with how many rate hikes there will be this year, which is not exactly how we should see the bigger picture. So far, the bigger picture paints a brighter picture for the US than for any other economies, with the Eurozone coming second.
So, I see this two-day testimonial as positive for the USD in the mid-term. By the way, we opened a sell forex signal in USD/JPY based on technical analysis and it´s going pretty well at the moment.
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