Posted on: 30 March 2016, by: Pepperstone Support, category: Market Review
Yellen came out swinging on the dovish front, hammering home the soft rhetoric in her prepared statement and offering little reprieve in the Q/A. The uber dovish speech after the recent USD long crushing FOMC is funnily enough completely opposite to the hawkish statements made by a couple of Fed officials in the past two weeks (see Bullard and Williams). Caught wrong footed again, market participants were forced to unload whatever USD they were holding ahead of NFP on Friday. Market chatter turns to a renewed look at the dot plots, with many economists adjusting their projected number of rate hikes to one this year, which is in stark contrast to December estimates of four into year-end 2016.
G-10 CommodityFX and EM were the big beneficiaries after the pullback yesterday. We are at interesting levels in AUD, NZD, and CAD with major range breaks seemingly likely post Yellen. NZDUSD is the one to watch – a close above .6880 tomorrow opens up a broader recovery to .7000 and potentially .7200 if we get a poor NFP number.
Gold up $19 on the day, followed by Spoos 18 handles to 2055, and a sharp tumble in US cash 10’s to 1.80%. Oil curiously finished off 80 some odd cents to $38.55. The lack of follow through in Oil considering how dovish Yellen was should be worrisome for the bulls.
US data, despite the dovish Yellen statement, was solid. Consumer confidence beat in March, posting 96.2 vs the 94.0 expected by the street. Case/Shiller was also higher by 0.1% to 0.8%. The SF Fed’s Williams says the US is showing no signs of a recession and given the recent data set coupled with the claims data nearing 42 year lows.