Dollar gains broadly after Yellen's testimony: July 17, 2014

Market Review - 16/07/2014 22:48GMT

Dollar gains broadly after Yellen's testimony

The greenback resumed its recent winning streak against majority of its peers on Wednesday as Fed's Yellen reiterated her comments and increased speculation of a rate hike as early as this year.

The single currency resumed its recent losing streak in Asia and European sessions and dropped to 1.3525 in New York morning. Euro continued to remain under pressure in New York morning as Fed's Yellen repeated her Tuesday's comments in her testimony and fell to an intra-day low at 1.3521 in New York afternoon.

Versus the Japanese yen, despite falling to session low at 101.64 at European open, the greenback rose to an intra-day high at 101.79 at New York open on dollar's broad-based strength, helped by the release of upbeat U.S. PPI. Later, price pared its gains and retreated to 101.64 again before stabilizing.

U.S. final PPI m/m n y/y came in better-than-expected at 0.4% n 1.9% vs forecasts of 0.2% n 1.8% respectively.

Although the British pound remained under pressure in Asia and briefly rose to session high at 1.7151 in European morning after data showed ILO unemployment dropped, price swiftly pared its gains and tanked to an intra-day low at 1.7113 as the data also showed an increase in claimant count. Later, cable recovered to 1.7146 in New York morning before retreating again on dollar's strength.

U.K. June claimant count -36.3K, May revised to show bigger fall of 32.8K; ILO unemployment dropped to 6.5% from 6.6% previously; avg weekly earnings +0.3% y/y in 3 mths through May, slowest since 3 months to May 2009.

In other news, Fed's Fisher said 'Fed may raise interest rates early next year, or sooner; Fed shud let its balance sheet begin shrinking in October; increasingly concerned about risks of current Fed policy; Fed is closer than many think to reaching goals for jobs, inflation; willing to tolerate temp. inflation rise abv 2% goal; dangerous to think Fed can always tighten policy if overshoots on employment goal; we are experiencing financial excess of own making; Fed is at risk of keep policy loose for too long; Fed risks damaging economy, appearing politically pliant; his views increasingly at odds with some Fed colleagues.'

On the data front, U.S. capacity utilization came in slightly weaker-than-expected at 79.1% vs forecast of 79.3%.

Data to be released on Thursday:

Australia leading indicator, NAB business confidence, EU inflation, U.S. housing starts, building permits and jobless claims.