Dollar Trades Nervously Ahead of Yellen Testimony and Other Top Forex News.
The dollar was largely mixed on Monday as investors remain nervous ahead of Federal Reserve Chairman Janet Yellen’s testimony on the bank’s semiannual monetary policy report on Tuesday.
In a day of light trading, it was the yen which made the most headway, despite Japanese government data showing that Japan posted its smallest current account surplus on record last year, throwing the spotlight back on Tokyo’s ability to service its huge debt and exposing a danger point in an economy starting to find its feet after years of underperformance.
expanded to JPY 0.20 trillion in December, from JPY 0.05 trillion the previous month. Analysts had expected the current account deficit to expand to JPY 0.06 trillion in December.
USD/JPY closed the session down 0.12% at 102.21.
In Europe, the single currency held on to recent gains after last weeks poor jobs data out of the U.S. continued to weigh on the market. But the euro failed to extend further after a ruling from the German constitutional Court that the European Central Bank’s bond-buying program may exceed its mandate, and referred it to European Court of Justice.
In other news, official data showed that French industrial production fell 0.3% in December, compared to expectations for a 0.1% uptick. Industrial production in November was revised down to a 1.2% increase from a previously estimated 1.3% rise.
The dollar ended the session little changed against the euro, with EUR/USD closing up 0.07% at 1.3645.
While the pound edged lower against the dollar, in light trading with no news scheduled on either side of the Atlantic. But traders remain cautious ahead of Wednesday’s statement by the Bank of England which is set to reveal new guidance on how quickly interest rates will rise in Britain’s rapidly growing economy.
GBP/USD ended the session down 0.04% at 1.6406.
Elsewhere, the greenback strengthened against the Canadian dollar after official data showed that the pace of Canadian housing starts slowed in January with a steep drop in multiple-unit homes, an indication builders are adjusting to a slowdown in buyers.
USD/CAD ended the session up 0.18% at 1.1053.
Finally, the greenback edged higher against the Australian and New Zealand dollars, which consolidated last weeks strong gains. AUD/USD closed down 0.19% at 0.8942 and NZD/USD slid 0.34% to 0.8268.
More coverage of today’s session.
- John Hardy: Yellen and BoE the focus for the week ahead. – This week’s chief focus is of course on Janet Yellen’s semi-annual testimony before the House on Tuesday and the Senate on Wednesday as the markets must get accustomed to a new Fed chair’s way of speaking. Particularly interesting will be how she will defend quantitative easing and Fed policy before what is likely to be an increasingly hostile Republican contingent this year ahead of the mid-term elections in November.
- FT: Bank of England to update guidance over speed of interest rates rise. – The Bank of England is set to reveal on Wednesday new guidance on how quickly interest rates will rise in Britain’s rapidly growing economy. After Governor Mark Carney signalled that the BoE would move away from linking rate rises to unemployment, its Monetary Policy Committee has been considering how to provide clarity to markets without jeopardising growth.
More Top Stories:
Marc Chandler: Central banks in focus. – We suspect that the move in the capital markets that has dominated the first several weeks of the new year has been completed and a new phase has begun. There are no policy meetings for the major central banks this week, but they are the focus for investors in the week ahead.
Dean Popplewell: EUR positions given time to think. – The first trading session after a non-farm payroll report, especially a disappointing one, historically tends to be the quietest in the month. However, investors do not have much time to diddle as the forex option market and their “vols” are indicating that event risk lies ahead.
Marc Chandler: New phase in FX has begun. – In general, the price action in recent weeks has been characterized by weaker equities, firmer core bonds, heavy emerging markets and a firmer yen and U.S. dollar. Our technical analysis suggests that that phase has ended and a new one has begun.
CBC News: Canadian dollar falls as housing starts slow. – The pace of Canadian housing starts slowed in January with a steep drop in multiple-unit homes, an indication builders are adjusting to a slowdown in buyers, according to Canada Mortgage and Housing Corporation (CMHC).
Sydney Morning Herald: Australian dollar’s short term lift above US90c won’t last: analysts. – The Australian dollar is likely to push back above US90¢ over the next three months, dashing the Reserve Bank of Australia’s hopes of much lower levels, a senior Westpac strategist says.
WSJ: New Zealand dollar higher late, eyes on Australian data. – The New Zealand dollar was higher late Monday, benefiting from a weaker U.S. dollar after disappointing U.S. jobs data Friday and improving risk sentiment.
Bloomberg: Gold, silver futures head for longest rally since August. – Gold and silver futures headed for the longest rallies since August as economic concerns boosted demand for the metals as alternative investments.