Fed chairman Janet Yellen testifies before the House Financial ServicesCommittee in her first semi-annual report on monetary policy since taking over fromBen Bernanke. Her written testimony will be released at 14:30 and the hearing willbegin at 16:00. Focus will be on her comments on the outlook for tapering of assetpurchases and her description of the economic outlook and labour market followingthe recent disappointing data for employment and ISM. We believe she will signal acontinuation of the Fed’s unofficial plan to taper USD10bn per meeting but that theFed will monitor developments closely and be flexible. We expect the bar to be quitehigh for the Fed to alter the current tapering course as many Fed members see risingcosts of further asset purchases and are generally confident in the medium-termrecovery of the US economy. The Fed’s preferred tool will be its forward guidancewith which it will try to steer overall financial conditions.
In between the release of the written testimony and the hearing Fed’s Charles Plosser(hawk, voter) will speak at 15:00 on the economic outlook. As a hawk he is verylikely to speak in favour of continued tapering.
Only few releases on the data front. In the US NFIB small business optimism isexpected to stay broadly unchanged at 93.8 in January (93.9 in December). There maybe some downside risk given the big drop in ISM in January.
Swedish data on tendencies for layoffs and vacancies are released today.
Read the full report: FX Daily
Danske Bank