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However home loans fell to -1.9%, much worse than expected, but this figure was largely ignored by the market. AUD/USD spiked to 0.898 following the data, after having been sidelined at 0.895 for most of the past 24 hours. The pair is now headed towards key psychological resistance at 0.90; where it has stuttered recently. Should it manage to clear this level then it will be facing January highs at 0.908 as the next key level.
Focus now switches to the USD side of the equation as the next key local reading will be jobs numbers on Thursday. Janet Yellen’s inaugural monetary policy testimony will set the pace for the USD after a few days of subdued trading.
USD in focus ahead of Janet Yellen’s testimony
Yellen will testify before the House later today and the Senate on Thursday. We also have Fed member Charles Plosser on the wires. As it stands it seems the market is positioned for a fairly dovish speech by Janet Yellen.
The mere appreciation we’ve seen in gold with four consecutive sessions of gains suggests there is a camp expecting Yellen to sound more cautious on the pace of tapering. This move was triggered by Friday’s disappointing payrolls reading.
While we are unlikely to hear any policy changes from Yellen, it is likely she will deliver a balanced speech which will essentially reinforce what we’ve already heard from recent Fed meetings and commentary.
While acknowledging the improvement in the job market, Yellen is likely to highlight that the jobs market is still operating below capacity while inflation is tracking well below trend. She is also likely to reinforce that an accommodative stance remains imperative and potentially that asset purchases are not on a pre-set course. Forward guidance might also be up for consideration after the unemployment rate dropped to 6.6% on Friday.
Admittedly, it seems the Fed feels the asset purchase program (APP) has run its course and they are likely to remain comfortable tapering at the current pace.