#Daily_market_report Yellen Says Weak Job Market Shows U.S. Still Needs Stimulus - British Pound Rallies on Inflation Report - EUR/USD is on the way to new lows Federal Reserve Chair Janet Yellen told lawmakers the central bank must press on with record monetary stimulus to combat persistent job-market weakness. “There are mixed signals concerning the economy,” Yellen said in response to questions during testimony to the Senate Banking Committee today. “We need to be careful to make sure that the economy is on a solid trajectory before we consider raising interest rates.” Even before the latest jobs report, Federal Open Market Committee participants raised their projections for the main interest rate over the next two years, while continuing to predict that the first increase would occur next year. Their median estimates, released last month, called for a rise to 1.13 percent at the end of 2015 and 2.5 percent a year later. They estimated in March the rate would rise to 1 percent by the end of next year and 2.25 percent at the end of 2016. Economists are predicting growth will snap back from a first-quarter contraction as an improving job outlook and stock-market gains boost consumer confidence and spending. Volume behind GBPUSD surged to the highest level in five months as the pair felt a surge in volatility. While the dollar was doing its part for ‘cable’, the British Pound was under fundamental power itself with the release of the most recent wave of inflation statistics. With the most direct path to rate speculation – the sterling’s primary fuel source – the CPI stood out. The year-over-year reading for June advanced more aggressively than expected to 1.9 percent, while the core pace moved back to the 2.0 percent target. This adds a critical dynamic to the BoE’s rate forecasts – emerging inflation pressures. EUR/USD opened the day at 1.3567, slid to 1.3556 and is trading not far from it. The euro is depressed, and it should be given the risks evolving in the banking sector of the region again. Although there were comments that Banco Espirito’s problems are not that huge to trigger broad based reaction of the industry, yesterday it looked like the problems were deeper than it is presented. And if the issue keeps going this way, it may trigger even broader sell-off of the pair with initial target at 1.3518 support level. Have a good day!
Posted on: Wed, 16 Jul 2014 07:49:26 +0000
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