Yellen speech sends USD sinking, oil prices plunge


30 March, AtoZForex, Lagos – Despite hawkish statements from various policy makers in recent time, Federal Reserve Chair Janet Yellen came out decidedly dovish in her speech yesterday. As Janet Yellen speech sends USD sinking, treasuries rallying while stocks edged higher.

In her speech, Yellen emphasized that caution in raising rates is "especially warranted," also clarifying that the path for rate hike remains uncertain. As the dollar dipped, the GBPUSD extended a two day rally, having gained about 300 pips this week so far and is set to extend the rally further. Today, we have the first peak into the latest job conditions with the ADP Non-Farm Employment Change scheduled for release. The crude oil inventories report is also due for release.

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ADP Non-Farm Employment Change (12:15 A.M GMT)

The labour market has been showing signs of reasonable strength lately and ADP report on private payrolls in March is expected to show a continuation in the jobs strength, forecast to come at 195k. Even so, it is clear that the Fed remains quite downbeat about the US economic conditions at the moment. Janet Yellen builds further that due to risks imminent to the outlook, she considers it will be the right thing for the Committee to cautiously proceed with adjusting the policy. This caution is warranted, since the Fed's funds rate is low, prompting the FOMC to be able to utilize conventional monetary actions in response to the economic disturbances. Building further Yellen commented:

"If economic conditions were to strengthen considerably more than currently expected, the FOMC could readily raise its target range for the federal funds rate to stabilize the economy. By contrast, if the expansion was to falter or if inflation was to remain stubbornly low, the FOMC would be able to provide only a modest degree of additional stimulus by cutting the federal funds rate back to near zero.”

The dovish tone of Yellen has conveniently pushed back rate hike expectations as the dollar continues to weaken.

Crude oil inventories (2:30 P.M GMT)

Oil prices dipped about 3 percent yesterday, as concerns grow over the continuing supply glut situation. Creating doubts about the potential continuation of the two-month rally. Kuwait and Saudi Arabia decided to resume oil production at the jointly operated 300,000-barrel-per-day Khafji field, at a period during which production is supposed to be frozen, triggered the selloff in oil. Today’s crude inventory report is likely to push oil further down if the report shows persistent increase in supply.

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