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U.S. Dollar Finishes Week Flat After Yellen Testimony

By:
James Hyerczyk
Updated: Feb 19, 2017, 07:57 UTC

A slew of U.S. economic news and remarks from U.S. Federal Reserve Chair Janet Yellen dominated the Forex markets last week and helped control most of the

U.S. Dollar Finishes Week Flat After Yellen Testimony

A slew of U.S. economic news and remarks from U.S. Federal Reserve Chair Janet Yellen dominated the Forex markets last week and helped control most of the price action. Other factors influencing the trade were political concerns over Trump’s ability to run a government and the uncertainty growing in France due to the increasing popularity of far-right candidate Marine Le Pen.

U.S. Dollar

The week began with the U.S. Dollar getting a boost from carryover buying related to the previous week’s bullish comments from President Trump on tax reform that he promised would be released in two to three weeks.

The first major report for the week showed U.S. producer prices rose more than expected in January. According to the Labor Department, its produce price index for final demand jumped 0.6 percent last month. This was the largest increase since September 2012 and followed a 0.2 percent rise in December.

The U.S. Dollar strengthened on February 14 after Federal Reserve Chair Janet Yellen signaled a faster pace of U.S. interest rate increases at the start of her two-day testimony before Congress.

In prepared remarks before the U.S. Senate Banking Committee, Yellen said the central bank will likely need to raise interest rates at one of its upcoming meetings in March or June.

“Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession,” Yellen said.

Yellen also expressed caution amid considerable uncertainty over economic policy under the Trump administration.

“Of course, it is too early to know what policy changes will be put in place or how their economic effects will unfold,” Yellen said.

The U.S. Dollar reached its high for the week on February 16 after the release of solid consumer inflation data and the last day of testimony from Yellen.

U.S. consumer prices recorded their biggest increase in nearly four years in January. According to the Labor Department, its Consumer Price Index jumped 0.6 percent last month after gaining 0.3 percent in December. January’s increase in the CPI was the largest since February 2013.

Yellen may have helped put in the top in the dollar index after she offered no additional insight on the timing of the central bank’s next rate hike. Based on the price action by the dollar into the end of the week, it looks as if investors are betting against a rate hike in March after Yellen sounded unconvincing.

For the week, the March U.S. Dollar Index finished up 0.160, or +0.16% at 100.951.

Australian Dollar

The USD/USD surged to its highest level since the U.S. election in November 2016. After consolidating for several days and ignoring the bullish movement by the U.S. Dollar, the Australian Dollar rose sharply higher, primarily driven by a better than expected Australian labor market report. The Employment Change was 13.5K and the Unemployment Rate dropped to 5.7%.

Investors couldn’t hold on to the gains, however, and the AUD/USD finished the week at .7664, down .0010 or -0.12%.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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