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Flash: Yellen might be on the defensive today - Westpac

FXStreet (Bali) - Fed Chair Yellen’s first semi-annual testimony to Congress dominates the calendar in London/NY, notes Sean Callow, FX Strategist at Westpac.

Key Quotes

"Her prepared text will be released at 8:30am NY, with her appearance commencing 90 minutes later. The overwhelming market expectation is that Yellen will defend QE tapering on the basis of an optimistic growth outlook, thus playing down recent weakness in payrolls and the ISM."

"The House Financial Services Committee however is more likely to focus on the costs of QE such as whether it could create inflation and/or financial bubbles. This angle is reinforced by the scheduling of 4 guests directly following Yellen’s appearance, 3 of whom are sure to take a critical view of the Fed as too loose."

"This suggests that Yellen might be on the defensive at times, thus arguing in favour of QE. We suspect that the testimony proves either neutral or slightly negative for USD."

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