The Markets Expect the Speech of the New Federal Reserve Chair

February 11, 2014

On Monday February, 10 the US dollar was traded almost without changes vs. major currencies before the report of the new Federal Reserve Chair Janet Yellen in the US Congress on Tuesday. The euro slightly strengthened its positions amid Investor Confidence in the Eurozone. The Canadian dollar slightly decreased amid weak Housing Market data in Canada.

On Monday trading at Forex passed without any definite course, because many participants of the market abstained from large-scale deals on the eve of the first speech of the Federal Reserve Chair Janet Yellen in the US Congress scheduled for Tuesday. There was no significant macrostatistic data released in the USA. On Tuesday Janet Yellen will report before the House Financial Services Committee, and on Thursday – before the Senate.

The markets will expect the signals from the US Central Bank about the QE3 Tapering plans, which negatively influences the dollar. Though straightway signals of the rate’s correction of assets buyout are not expected, confirmation of the US monetary policy continuation will be of great importance, especially after the release of a series of negative statistical economic data.

The US Labor Market report from Conference Board research group didn’t show slowdown in employment growth, which slightly contrasts with official data. Employment Trends Index increased in January to 116.61 from the upwards revised December reading of 115.62. In an annual rate the index increased by 6.0% in January.

The euro slightly strengthened its positions on Monday amid the Investor Confidence growth in the Eurozone. According to research-and-development center Sentix, Investor Confidence in the Eurozone suddenly increased in February by 1.4 p. to 13.3 p., whereas the decrease was expected. The improvement was mainly induced by the growth of current situation estimation in February. Subindex of the current situation appeared to be positive for the first time since August 2011.                            

 

At the same time industrial production in Italy and France appeared to be worse than expected. Industrial production in Italy sharply dropped in December after 3 months growth – by 0.9% comparing with November. Industrial production in France in December also decreased more than expected, by 0.3% m/m, whereas no changes were expected before. At the same time petroleum processing volume and automobile production sharply dropped. The German data which was released on Friday also demonstrated decrease of industrial production by 0.6% m/m.

Meanwhile the Minister of Industry of France appealed to Eurozone statesmen to move into action of easing the overestimated euro, which suppresses the economic activity and trading in France. According to him, the most depressed Eurozone region has the most expensive currency. In 2012-2013 the euro increased vs. the US dollar by 10%, and vs. the yen – by more than 40%. At the same time the GDP of the Eurozone countries in 2013 was reduced by 0.2%, whereas the US GDP increased by 3.4%, and the Japanese GDP – by 2.3%.

The Canadian dollar a bit decreased on Monday amid weak Housing Market data in Canada. Housing Starts in Canada in January decreased by 3.7% comparing with the previous month to 180 200 houses per annum, whereas less decrease to 185 000 was expected before. Despite the last positive Employment report – 3-months Employment trend can be hardly considered to be positive. The Canadian dollar is also under pressure of the weakening of the national currency, which didn’t sufficiently influence the Canadian export.

 

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