Yellen, Gold and Aussie Jobs

Day 1 of Yellen's testimony failed to provide any fireworks but the market detected a slightly dovish bent. The US dollar was the top performer on the day while NZD lagged. The focus now shifts to the Australian jobs report.  

Yellen followed up the optimistic FOMC statement by noting a pickup in the economy but she also outlined downside risks to inflation like slack in the labor market, the lack of investment and disappointment in housing.

There was nothing in her testimony to suggest a rush to raise rates and the bond market rallied once again. US 10-year yields continue to flirt with the 2014 lows and that 2.568% level is probably the most important support line in all of markets at the moment. The low today was 2.575%.

One spot of positive news on inflation was the Q1 US labor cost report showing a 4.2% compared to 2.6% expected. Unfortunately the rise came on falling productivity. Together it points to a weather-related skew but it's something to watch in the months ahead.

We wrote yesterday about the inability of gold to rally when the dollar was weak. That proved to be a signal as gold fell $18 Wednesday on very light USD strength. The 100-day moving average at $1285 caught the latest move and that's a mark to watch in the day ahead.

Up next is the Australian jobs report at 0130 GMT. Unemployment is expected at 5.9% from 5.8% with 8.8K jobs created. The full-time/part-time breakdown is always an important component of the report and AUD will be highly sensitive to the data. 

The other highlight of the session is Chinese trade balance at 0200 GMT. The surplus/deficit is less important than rises in imports and exports, which are expected down 3.0% and 2.1% respectively.