Live speech – Janet Yellen’s testimony before the House Financial Services Committee

Chairwoman Janet Yellen will testify once again today, this time before the House Financial Services Committee. Expectations amongst investors signal a continuation of yesterday’s tone, although with scarce-to-none room for surprises.

Key Notes

Chief Jante Yellen has emphasized yesterday that rates should increase in a gradual fashion this year, adding that it would be ‘unwise’ to wait too long to hike.

Today’s testimony should add to the recent views that a stronger economy should warrant higher rates, leaving the chances of a rate hike next month well and sound. It remains to be seen whether Yellen decides to delve further into the potential effects of extra fiscal stimulus (as promised by the Trump’s administration), as this carries the potential to be the next relevant driver for the Dollar’s price action.

In fact, following yesterday’s message and today’s upbeat results from US inflation figures and Retail Sales, the probability of a rate hike at the March meeting has now climbed to almost 40%, based on Fed Funds futures prices.

What could be the likely reaction from USD?

The greenback, in terms of the US Dollar Index (DXY), has regained the 101.00 handle and above in response to Yellen’s testimony and rising expectations for a rate hike sooner rather than later, and is struggling to surpass the key area around 101.70. There is practically nothing in terms of significant resistance levels until the boundaries of 103.00 the figure seen on January 11, prior to the key region in the mid-103.00s and the 14-year tops at 103.81 (January 3).