U.S. dollar rallies after Yellen's balanced speech in Jackson Hole: Aug 25, 2014

Market Review - 23/08/2014 00:03GMT 

U.S. dollar rallies after Yellen's balanced speech in Jackson Hole

U.S. dollar rose broadly against major currencies on Friday after Federal Reserve Chair Janet Yellen came out more balanced than expected on her views about the U.S. economy in a speech to central bankers in Jackson Hole, Wyoming, however, Yellen noted faster recovery in the sector could accelerate the timing of a Fed interest rate hike. 

The greenback rallied versus the Japanese yen to a fresh 7-month high at 104.18 whilst euro dropped to a fresh near 1-year low at 1.3220 versus U.S. dollar on Friday after Fed Chair Janet Yellen's remarks in Jackson Hole, Wyoming. The British pound closely tracked euro's movement and fell briefly to a fresh 4-month trough of 1.6562 before staging a minor recovery. 

Fed's Chair Janet Yellen said in Jackson Hole that 'no simple recipe for appropriate policy in current U.S. labor market context; still unclear degree of remaining labour slack how quickly it will disappear; tightening policy too soon as inflation moves towards 2% might prevent labor market from fully recovering; Fed emphasis shifting to determining what labor conditions would bring about less accommodation; Fed needs to make difficult judgements about cyclical, structural influences on labor market; urges caution in judging that recent wage data points to weaker labor conditions indicated by unemployment rate; could reasonably expect further increases in labor demand to pull sizeable share of discouraged workers back into workforce.' 

ECB's president Draghi also spoke at the annual Jackson Hole conference of central banks that 'recent growth data confirmed the currency bloc's recovery remained "uniformly weak" and promised to keep the policy stance accommodative for an extended period of time. Draghi said stimulus steps announced in June, helped by a weaker euro, will boost demand in the ailing euro zone economy, but stressed on Friday that the central bank stands ready to do more'. The single currency rebounded briefly to 1.3261 in late New York after comments from ECB's president Draghi. 

ECB's president Draghi said near New York close that 'new ECB lending to banks will be ineffective in helping economy without government structural reforms to promote business; if inflation drop continues, risks for price stability would increase and governing council would need to use all available tools in reaction; drop in European inflation due to temporary factors, such as Ukraine, energy prices.' 

In other news, Charles Plosser, president of the Philadelphia Fed, said in an interview that it was better to tighten monetary policy too soon rather than too late. To get on course to tighten policy, he said, the U.S. central bank must first acknowledge that it can't fix things at the margins of a labor market that is otherwise looking much better. 

Next week will see the relesae of Ifo business climate, current conditions and Ifo expectations, U.S. Markit services PMI and new home sales change on Monday. 

New Zealand's imports, exports and trade balance, China's leading economic index, U.S. durable goods and consumer confidence on Tuesday. 

Germany's Gfk consumer sentiment, Swiss UBS consumption indicator, France's business climate and Italy's consumer confidence on Wednesday. 

Australia's HIA new home sales, building Capex and capital expenditure, Germany's unemployment rate and change, Italy's retail sales, eurozone business climate, consumer confidence and economic and industrial sentiment; U.K. CBI distributive trades; Germany's CPI and HICP, Canada's current account, U.S. PCE, GDP and pending home sales on Thursday. 

Japan's unemployment rate, CPI, industrial output and retail sales, New Zealand's business outlook, Australia's housing credit and private sector credit, Japan's housing starts and construction orders, Swiss KOF indicator, Italy's unemployment rate, eurozone inflation and unemployment rate, U.S. PCE, personal consumption and income, Canada's GDP, producer prices and raw material prices, U.S. Chicago PMI, University of Michigan condition and expectations on Friday.