Fed Chair Sits on Her Hands

GBP/USD is currently trading at about 1.4490, GBP/EUR is trading at about 1.2835, with the Sterling climbing a little bit higher both against the U.S. dollar and the Euro through Wednesday’s market. We saw a bounce back in equity markets, as well as bounce back in banking shares and Sterling which has been tad with the same brushes.

#Commodity currencies and emerging market currencies due to its weak #current account position, bounced back a little bit as investors took on a bit more risk.

Yesterday was all about Janet Yellen’s testimony to House Financial Services Committee in Washington DC. Going into the testimony, there’s a lot of consolation about the Federal Reserve’s believe that they my hike rates by at least four measures this year, according to the dot chart that was released as part of December’s #Federal Reserve meeting.

Janet Yellen didn’t come out and say “that’s not going to happen” and she didn’t come out and say “that’s going to happen,” but she had to thread a very thin middle ground between being too hawkish and being too dovish.

The U.S. dollar did falloff a little bit as the committee focused in on the possibility of negative interest rates in the #United States. So whether they’ll actually be legal (the framework setup in the United States, to setup the Federal Reserve) to allows them to pay #interest on excess reserve, or whether it allows them to charge interest as would be the case in a negative interest rate environment remains to be seen.

Market Opinion suggests that the U.S. dollar is a little bit weaker. It was such a consensus play coming into 2016 that people would be “Long” the U.S. dollars. The moves that we’ve seen in interest rate expectation has obviously weakened the greenback.

#Sterling bounced back as I’ve said yesterday despite poor industrial production number, which likely shade Q4 #GDP a little bit lower, down to about 0.4% on the quarter versus 0.5% on the first reading. Moving forward, it still remains weakened, with some #markets pricing in that market is not going to see an interest rate rise in the UK, until August 2019, but there’s a 50/50 chance that we’ll see a cut at the end of the year – #CSFX Research Desk believes this is entirely ludicrous.

Over the course of the day, we do have Janet Yellen speaking once gain to the Senate today at 15:00 BST, but for now things are fairly quiet. The markets are watching the Yen, which has driven 6.6% higher so far this year and we’re looking to see where the Bank of Japan intervenes at some point later today.