A lack of follow through of yesterday’s USD weakness is a warning but the downward trend remains strong. Event risk today is centered on Chair Yellen, who will provide the economic outlook to the joint economic committee of Congress. She is likely to strike a relatively neutral tone, highlighting the improvement in the headline labour data but noting how slow wages and other labour metrics have been to turn; while inflation remains contained. The takeaway is largely expected to be that tapering is on course, that interest rates will begin in Q215, that the pace of hikes once they start is likely to beslow and that the U.S. economy has improved but there are still hurdles ahead. Much of this is largely priced into markets.
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Scotiabank