Article Highlights

  • U.S. headline CPI up 0.4% in Oct as expected
  • U.S. core CPI posted 0.1% uptick vs. 0.2% forecast
  • Philly Fed manufacturing index down from 9.7 to 7.6 vs. 8.1 consensus
  • U.S. initial jobless claims at 235K vs. 257K forecast, 254K previous
  • U.S housing starts up from 1.05M to 1.32M vs. 1.16M forecast
  • Yellen: Rate hike to become appropriate relatively soon
  • Fed head Yellen warned about the dangers of too much fiscal stimulus
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The Greenback was once again the king of pips, thanks to hawkish remarks from Fed head honcho Janet Yellen. What did she have to say?

Major Events:

Fed head Yellen’s testimony – In her prepared speech before the Joint Economic Committee in Washington, FOMC Chairperson Yellen pretty much sealed the deal for a December Fed tightening in saying that a “rate hike could well become appropriate relatively soon.”

When it comes to the new administration’s fiscal policy plans, she mentioned that the Fed would stand ready to make any necessary adjustments but warned that too much fiscal stimulus could cause the economy to overheat. She added that government officials must take into account that the U.S. is already near full employment but conceded that it’s up to Congress to weigh the costs and benefits of increased fiscal stimulus.

During the Q&A part, Yellen confirmed that the U.S. economy is making good progress now but admitted that it’s not clear why investment has been weak. While this is dampening productivity, she explained that the Fed has already pulled all the strings when it comes to encouraging businesses to invest.

Lastly, Yellen also had a few remarks to say about the Dodd-Frank legislation, reiterating that the economy is safer because of this regulation and that she’d rather not see all these improvements eliminated due to Trump’s planned deregulation.

Mostly upbeat U.S. reports – Yellen’s upbeat assessment of the U.S. economy were underscored by mostly positive data in the latest New York session. Initial jobless claims fell from 254K the other week to 235K last week, lower than the estimated 257K figure and indicative of strong momentum in the jobs market. Housing starts surged from 1.05 million to 1.32 million, outpacing the projected rise to 1.16 million.

As for the not-so-good results, headline CPI simply came in line with expectations of a 0.4% gain for October while the core version of the report printed a meager 0.1% uptick versus the estimated 0.2% gain. Also, the Philly Fed index was down from 9.7 to 7.6, just below the 8.1 consensus.

Major Market Movers:

USD – Dollar domination was the name of the game, especially after Fed head Yellen didn’t waver from her hawkish stance in light of the new administration.

EUR/USD resumed its slide from 1.0734 to 1.0590 (-1.38%), USD/JPY rallied from 108.97 to 110.47 (+1.37%), USD/CHF popped up from parity to 1.0070 (+0.70%), and AUD/USD dropped from .7472 to .7400 (-0.96%).

Watch Out For:

  • 11:30 am GMT: New Zealand ANZ consumer confidence index

See also:

London Session Recap

Asian Session Recap

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