Wednesday was all about Fed Chair Yellen’s testimony, and with the developments that have unfolded through 2016 so far, the market was looking to (hoping for) some dovish leaning towards rate policy ahead.
Instead we got some tacit justification of the December move, stating that gradual rate hikes would follow if the economy warranted it. This was not dovish enough, and leading the way higher was a EUR/USD rate already in retreat. Plenty of fast money led the rally to 1.1335-40 levels yesterday, and they were just as quick to exit today, eventually taking out 1.1200 lower down.
There was no negative impact on stocks, but the USD recovery failed to gain any momentum against the JPY, with repeated selling seen through 115.00. Cable looked to play catch up on the USD retrenchment, but racing through to the upper 1.4500s, all daily gains were reversed to end flat on the day.
UK (Dec) industrial/manufacturing came in softer than forecast, but was ignored as the ONS said this would impact less than 0.1% on GDP. A choppy day for the CAD, but all inside the Tuesday range, though the upside is looking the more vulnerable. The DoE reported a surprise draw, but both oil and spot now following the USD move.
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