The doves remain in control: Yellen remains cautious about the economy. Even though she allows for a change in course if the labor market continues improving quickly, she still see slack. She also says that bond buying is likely end with QE but that too many Americans remain unemployed. Rates to remain low for a “considerable period of time†after QE ends in October.
She mostly sticks to the known lines in the prepared statement, but might still throw something in the Q&A session.
Update: in a late reaction, we see The Janet Jump: USD advances across the board on Yellen’s testimony
Before the statement was released, EUR/USD traded around 1.36, GBP/USD was flirting with 1.7170 and USD/JPY around 101.60. GBP/USD broke to a new high just after the statement was released, but retreats afterwards. The dollar is slightly weaker also against other currencies, but the reaction is limited.
Fed Chair Janet Yellen begins reading out her testimony in Washington but the statement is already out. She was expected to acknowledge the improvement in the US economy.
The high hopes (for the dollar bulls as least) came out especially as both the NFP and the Fed favorite JOLTS job figure are painting a rosy picture. Also core inflation and the Core PCE Price Index are higher, but we cannot say that inflation is heating up, especially as earnings are moving up only very slowly. Markets currently expect a rate hike in mid 2015.
Earlier, US retail sales disappointed, but revisions and a strong Empire State Manufacturing Index compensated.
While EUR/USD is frustratingly steady, GBP/USD jumped higher on stronger inflation and marked a triple top. This is now broken with 1.7190 as the new high. 1.72 is unchallenged at the time of writing.
