Yellen Passes Audition, Yen Slumps

Our impressions of Janet Yellen's audition for Fed Governor were mostly positive. The pound was the top performer but yen weakness was the major theme.

What Yellen said at her confirmation hearing was less important than what she didn't say. Most market watchers were expecting some strong words to discourage bets on ultra-dovish policy for the long term but she didn't deliver anything beyond the token nod that there are risks on both sides of QE.

We argued yesterday that market interpretation of her prepared statement was overdone and we saw that unwind a few hours later. In her Q&A the market was reluctant to make a strong move in either direction but stocks and risk trades found some support.

Yellen's preoccupation with the weak labor market was the takeaway from her speech and she hinted that 7.3% unemployment understates the problem. Although she said was QE data dependent, she added that it was important not to remove support too soon.

Traders were also watching to see how Yellen handled questions and she grew increasingly comfortable as the session continued. He style is plain-spoken but bland and she steered well-clear of the hazy points of current policy. Overall, it's difficult to imagine the Yellen Fed will be any less dovish than the Bernanke Fed.

Despite all the fundamental news, including slightly disappointing readings on initial jobless claims and US trading, the technical were in the spotlight. A major move could be underway in GBP/JPY as it broke out to a four-year high. USD/JPY also climbed through 100.00 and along with Nikkei strength points to a fresh round of yen weakness.

The pound was also impressive. Cable traded flat on the day but was able to easily recover from selling after a soft UK retail sales report – that's a good sign.

Yellen Passes Audition, Yen Slumps

Our impressions of Janet Yellen's audition for Fed Governor were mostly positive. The pound was the top performer but yen weakness was the major theme. The Asia-Pacific calendar is quiet.

What Yellen said at her confirmation hearing was less important than what she didn't say. Most market watchers were expecting some strong words to discourage bets on ultra-dovish policy for the long term but she didn't deliver anything beyond the token nod that there are risks on both sides of QE.

We argued yesterday that market interpretation of her prepared statement was overdone and we saw that unwind a few hours later. In her Q&A the market was reluctant to make a strong move in either direction but stocks and risk trades found some support.

Yellen's preoccupation with the weak labor market was the takeaway from her speech and she hinted that 7.3% unemployment understates the problem. Although she said was QE data dependent, she added that it was important not to remove support too soon.

Traders were also watching to see how Yellen handled questions and she grew increasingly comfortable as the session continued. He style is plain-spoken but bland and she steered well-clear of the hazy points of current policy. Overall, it's difficult to imagine the Yellen Fed will be any less dovish than the Bernanke Fed.

Despite all the fundamental news, including slightly disappointing readings on initial jobless claims and US trading, the technical were in the spotlight. A major move could be underway in GBP/JPY as it broke out to a four-year high. USD/JPY also climbed through 100.00 and along with Nikkei strength points to a fresh round of yen weakness.

The pound was also impressive. Cable traded flat on the day but was able to easily recover from selling after a soft UK retail sales report – that's a good sign.