FX market outlookPosted on Tuesday, April 11 2017 at 8:00 am GMT+0000
Dollar weakens, safe havens gain on geopolitics and Yellen comments.
Safe haven assets were in demand as risk aversion in the markets today drove investors to the yen and gold. Geopolitical concerns and Fed Chair Janet Yellen’s comments weighed on US Treasury yields. The dollar index consolidated losses after falling below the key 101 level yesterday.
Tensions in Syria and growing unease about North Korea supported gold prices, which rose for a second day to reach an Asian session high of $1257.46.
The Chair of the US central bank, Janet Yellen, gave a speech at the University of Michigan’s Ford School of Public Policy on Monday. Her remarks on monetary policy gave little reason for investors to be bullish on the dollar, as she suggested that the Fed will now shift to a more neutral stance. The market’s interpretation from her comments were that rate hikes will be more gradual.
The dollar fell against the yen after Yellen’s speech and reached a low 110.45 yen in Asian trading today.
The euro was more stable against the dollar after dropping to a one-month low on Monday. The single currency struggled below the key $1.0600 level in today’s Asian session, as election risk in France will likely keep it under pressure.
The pound will be in focus later today as UK inflation data are due. Cable has managed to rise back above $1.2400 but upside momentum stalled at $1.2431 in the Asian session.
The Australian dollar dropped below the key $0.7500 level after the NAB business sentiment index fell from 7 to 6 in March. But the fall was cushioned by a better gauge on business conditions which hit the highest level since 2008.
Oil prices paused gains after a five-day rally which took WTI crude to $53.20 a barrel on Monday and Brent crude reached $56.12 a barrel.
Market focus now shifts towards the upcoming economic releases, which include UK inflation data, Germany’s ZEW economic sentiment survey and Eurozone industrial production figures. Out of the US, the JOLTS report will be released. Investors will also watch a speech by FOMC member Neel Kashkari later today.