Dollar Holds Gains; Markets Look To Yellen

Market Drivers for April 10, 2017

  • USDJPY makes a run to 111.50
  • EZ Sentix better
  • Nikkei 0.70% DAX -0.18%
  • Oil $52/bbl
  • Gold $1252/oz.

Europe and Asia:EUR: Sentix 23.9 vs. 21

North America CAD: Housing Starts 8:30USD Yellen Speech 16:10

It’s been a very quiet open to the week’s trade with most of the majors essentially stuck at the same levels as the Friday close with USDJPY the only mover of the night as the pair made a run for the 111.50 level.

After, a small selloff in the immediate post-NFP reaction on Friday, the dollar steadily gained bid as traders shrugged off the weak employment data and focused on the steady growth in wages and the generally hawkish rhetoric from NY Fed Chief Dudley. As we’ve argued many times in the past, with the unemployment rate at 4.7% the market is now far less concerned with job growth and far more focused on wage growth which will now become the principal mechanism for transmission of inflation and will be the dominant factor in guiding Fed policy forward.

To that end, NY Fed Chair Dudley’s comments that rate hike policy won’t be greatly affected by any balance sheets adjustments as the Fed begins to consider unloading its 3 Trillion dollar stockpile of bonds, proved to be a boost for USDJPY on Friday. The pair has survived multiple assaults on the 110.00 level over the past two weeks and now appears to be a short covering rally that could squeeze to 112.00-112.50 level.

With no data on the docket today, trading may be lackluster for the rest of the day. The only event risk of note comes very late in NY session when Fed Chair Janet Yellen joins a discussion at University of Michigan at 16:10 NY time. That is a very low liquidity time of the day, so any surprising remarks from Fed Chief could send markets into a tumble, but aside from that, the mild dollar bid appears to be the dominant theme of the day.

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