Over the past 24 hours traders’ focus has been on the US Dollar due to Fed Chairwoman Janet Yellen’s semi-annual testimony and with good reason as her comments always reveal hints about the central bank’s expected policy. This time round the most important thing on everyone’s mind was the timing of the expected rate hike in the US that will give a whole new outlook on the Dollar and the Fed boss didn’t disappoint.
Contrary to what most analysts expected before her testimony Yellen was far more forthcoming in her comments and made abundantly clear that every Fed meeting moving forward could be a potential date for liftoff, including September’s meeting. Her remarks were more bullish than previously expected showing her optimism and confidence on the domestic economy and the US Dollar benefited from it and we should expect to see more in the short-term.
Following Yellen’s remarks and the heated debate that was taking place in the Greek Parliament over the proposed deal with the Eurozone the Euro extended its losses yesterday. Even though late last night the Greeks passed the necessary measures for negotiations to start the governing party met a lot of resistance, especially from within. Now that casts doubts on whether the Greeks will be able to implement the deal and it also means that the negotiations that will now start with the Eurozone might again prove strenuous.
As a result the Euro is trading just shy of the 1.0900 support floor again today and its outlook continues to look bearish. The 1.0920 support was the level from where the Euro rallied higher last time and we expect that it will provide some cover this time around again but with sentiment being towards more losses we could see a further extension to the downside soon with the 1.0850 area coming into focus.
The Cable turned lower yesterday when the employment-related report printed in a mixed fashion, several components printed lower than expected showing a temporary correction in the labor market in the UK. If it wasn’t for the bullish comments made from BoE policymakers over the past 48 hours the Pound would have moved even lower but yesterday it managed to end the day above the 1.5600 level.
Nevertheless, with the Dollar on the rise any moves below yesterday’s lows could allow the Cable to retrace to the downside threatening to break below the 1.5500 level.