The dollar had a miserable day yesterday, undermined by the fall in US rates. 10s are under 2.6% and the 1year in 5 years is testing the lows seen last October,” notes SocGen.
Yellen in town:
“Janet Yellen’s testimony to the JEC in Washington is the big event on the calendar today, and the market is positioning itself for (more) dovish comments,” SocGen adds.
Market reactions:
“That means that we would get a bigger reaction in both bond and FX markets to relatively hawkish comments, but it is hard to imagine those happening,” SocGen argues.
The trades:
“We’ll stay long USD/JPY as long as 101 holds and a glance at the very weak Japanese PMIs this morning encourages us, even if a soft Nikkei causes yen buying and even as we are frustrated by the price…we are looking for an opportunity to sell NZD (down on soft milk prices and verbal intervention despite strong employment data), CAD and AUD,” SocGen advises,