US Dollar Higher Ahead of Yellen Speech

The US dollar has regained after weaker data as investors await Fed Chairperson Janet Yellen’s speech. The currency strengthened against the euro and reached a new one month high against the Japanese yen. US durable goods data of May, pushed the euro higher against the dollar in Monday early sessions. Weaker data made euro reach a weekly high against the dollar, but the pressure eased soon as dollar gained an edge later in the day.


Draghi Has Spoken, Time for Yellen


On Monday, chief of the European Central Bank Mario Draghi said that keeping interest rates super low will help in creating more jobs and decreasing inequality. In an interaction with university students in Lisbon, he mentioned that by stimulating borrowing in the economy by lower interest rates, ultimately inequality could be gotten rid of. This signifies that monetary stimulus will not go anywhere for quite some time. A chance of diluting the stimulus also looks faint.

Doubts about the US economy made euro rise against the dollar earlier in the week. The May durable goods data didn’t look promising for the US and the aggressive interest rate hike by the Feds didn’t do much to help dollar lift. Now investors eagerly wait for Tuesday when Yellen will be delivering a speech in Europe.

What Could Yellen Say?


Experts suggest that Yellen could be maintaining her stance of interest rate hike. She could suggest that despite mixed economic data, the US is still in good shape. This could help pave the way for another interest rate hike, as suggested by Feds, later this year. Traders are expecting Yellen to make positive statements about the economy. Ahead of her speech, the US dollar index is rising. It went up to 97.440, after registering a 0.2 percent increase. The index measures the dollar’s performance against six major currencies.

However, the gains could have been higher if traders were completely certain of Yellen’s stance. Many traders are expecting her to opt for a dovish statement, which has limited the gains for the dollar. The housing data has not been very exciting and latest inflation numbers also hint to towards a dovish stance. The American economy has shown struggles in manufacturing and retail sectors which could be a cause of concern for the traders.

As traders remain divided over the Fed’s next move, it would be interesting to see how Yellen could convince them that the US economy is on the right path.