Dollar Beginning to Break Out, Stevens Next
We wrote yesterday about the lack of enthusiasm for Yellen's speech and overall complacency on the Fed. An overwhelming consensus of analysts sees nothing but endless calls for patience and slow steps to raising rates. The consensus is so clearly dovish that we argued there is little risk in betting on a more hawkish stance and stronger dollar.
That's part of what happened on Tuesday as the US dollar broke out of a recent period of consolidation against the euro and continued to punish the pound following 7 weeks of declines in cable. The next shoe to drop could be USD/JPY as it flirts with 103.00.
All eyes were on the CPI report heading into the session but prices rose 2.0% y/y as expected and other measures were also in-line. Instead the market shifted focus to a strong housing starts which rose to 1063K compared to 969K expected. That gave traders a reason to buy the dollars and technical breaks accelerated the moves into one of the better days for the US dollar in months.
On Wednesday the market will turn to the FOMC minutes but the focus in the coming hours shifts to Australia where Stevens appears in the House of Representatives for his semi-annual grilling at 2330 GMT. It should be fairly easy for him to commit to a wait-and-see approach but he's an off-the-cuff sort of leader so be ready for anything.The other main event is at 2350 GMT when Japan releases trade data for July.
|RBA's Governor Glenn Stevens Speech|
|Aug 19 23:30|
|1.093M||0.969M||0.945M||Aug 19 12:30|
|Housing Starts (m/m)|
|15.7%||8.6%||-4.0%||Aug 19 12:30|
|Aug 20 18:00|