Live Speech - Janet Yellen’s Humphrey Hawkins Testimony

Chief Janet Yellen will testify later today (15hGMT) before the Senate Banking Committee, best know as the semi annual Humphrey Hawkins Testimony. Today’s testimony is the first one of two, the second one to be held tomorrow before the House Financial Services Committee.

Key notes

Market consensus expects Yellen’s monetary policy report and prepared remarks to deliver a somewhat hawkish message, although congressmen will also enquire on the regulatory environment, the Fed’s supervisory role and independence as well.

Investors will be looking to any clues regarding the timing of the next rate hike, with the June meeting emerging as a potential candidate. According to CME Group’s FedWatch tool, the probability of a rate hike that month is nearly 50% based on Fed Funds futures prices.

Yellen would likely emphasize the solid health of the US economy, particularly regarding its targets on both employment and inflation, while it is less probable that she discusses changes to the balance sheet policy. In the same line, Yellen will surely avoid any comment on the potential fiscal stimulus announced by President Trump.

What can we expect of the Dollar?

The US Dollar Index – which gauges the buck vs. a basket of its major competitors – has started the week on a choppy fashion after a positive performance throughout last week, including a test of the critical barrier at 101.00 the figure and is now looking to consolidate around 100.80, where is located the 38.2% Fibo retracement of the November-January bull run.

Market expectations of a USD-supportive tone from Yellen today should see DXY re-visiting the 101.00 handle as the interim target, facing the next level around 101.30, where sits the 55-day sma. On the downside, the mid-100.00s area should offer decent initial support ahead of the 20-day sma around 100.30.