Janet Yellen last night addressed Congress on the state of the economy as the Fed sees it, with the main points being that the Fed would consider negative rates if economy soured. However, the ‘economy is performing well’ and that December was a ‘live’ event (yet October was too). One Democrat Senator chimed in with, ‘God told him that she should raise rates in May 2016’. This muddled communication pushed the currency about.
New York President Bill Dudley also spoke last night and backed Yellen’s testimony, ‘December is a live possibility for rates lift off’. As a known dove, this is a telling statement.
USD had a pretty positive night on all of this as the premium that was taken out over September was quickly reinstated against major G10 pairs.
The EUR lost against all as Draghi jawboned the currency. EUR/USD is now at the lowest level since 7 August $1.084.
Glenn Stevens is addressing the Melbourne Institute on Economic and Social Outlook. Considering the statement on Tuesday and the fact the monthly statement of monetary policy is out tomorrow, this will be a speech of interest, as AUD just got back to September levels. Communication jawboning is his style, so listen out for little hints of possible cuts in 2016.
Ahead of the open we are calling the ASX down seven points to 5235.