FX round-up: Speeches eclipse data releases, dollar drops on Yellen talk
By Digital Look
Date: Friday 25 Aug 2017
(ShareCast News) - Data releases out on Friday included positive German business climate with a print of 115.9 and worse than expected durable goods orders number in the US at -6.8%.
But for market participants, Friday was all about the Jackson Hole symposium and speeches from Fed chair Janet Yellen and ECB President Mario Draghi.
US dollar bulls were looking for some sort of lifeline from Yellen, but with the dollar index dropping 0.47% to 92.835 after she spoke, it was clear to see that she did not get the memo.
The Fed chair was speaking about financial stability after the onset of the financial crisis and touched on regulation, liquidity and various other topics that, while not key FX drivers, were enough to spark moves, albeit more because of what she did not say.
In her speech, she said reforms put in place after the 2007 to 2009 crisis have strengthened the financial system without impeding economic growth, and any future changes should remain modest.
When the smoke cleared, cable was higher by 0.61% to 1.2878, taking out resistance at 1.2843 and 1.2863 with ease by 1600 BST, pushing sterling to it's highest level against the dollar in four days. Although the crux of her talk was about financial reform and not monetary policy, traders were happy enough to bid the pair higher which could be short lived as the bleak perception for the UK in the face of post brexit has not changed.
Despite the day's rally, cable still trades 2.39% lower for the month.
David Madden at CMC Markets had this to say, "Broader markets are happy to push sterling lower with any negative news, and there is a big gap opening up between the outlook for both the Eurozone and the UK economies," adding, "It is fair to say that Mr. Draghi is the 'headline act'."
Against the euro, the pound was fairly flat at 1.0838 and attention will now turn to ECB President Mario Draghi who is due to speak at 1800 BST.
"The ECB chief will probably use the speech to congratulate himself on the recovery of the euro zone, thanks to the loose monetary policy," said Madden, adding, "but he might use the relatively low inflation rate as an excuse not to talk about reining in the stimulus package."
Unsurprisingly, USD/JY traded lower on Friday to 109.27 by 1730 BST, down 0.25%. Although Bank of Japan (BoJ) governor Haruhiko Kuroda is not a listed speaker, any conference attendee can make comments during session discussions and yen traders will be keen to hear any remarks concerning normalising monetary policy and his views on the latest round of inflation figures that are currently below the 2% target set by the bank.
The pair was able to take out support at 109.44 but stalled at 109.22.
Another safe haven currency, the Swiss franc was also a beneficiary of the unstoppable dollar weakenss on Friday, with USD/CHF trading 0.9% lower to 0.9568.
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