Yellen tanks dollar US ADP numbers good
German CPI good Japan struggling

Yellen has taken a page out of Mr. Draghi’s book and moved markets with her speech yesterday.  The dollar plunged yesterday afternoon and continues to do so this morning after Yellen’s comments were significantly more dovish than the markets were expecting.  In what some economists are calling her best performance yet, Yellen clearly spelled out what the Fed needs to see in order to raise rates further and stressed the importance of a gradual pace of hikes and overall caution.  She focused heavily on global factors and risks and specifically mentioned that the dollar could not appreciate further.  This signals to many that the Fed will delay hikes indefinitely if the USD were to continue on the course it has been for the last year or so.  Yellen also mentioned that commodity prices needed to stabilize and that the US needed to see stronger inflation growth.  Her speech came less than a day after some of her colleagues of the FOMC said they would like to see rates increase as early as April signaling uncertainty and discord within the Fed.  Janet Yellen clearly asserted her leadership position yesterday and set the direction for the Fed.

In the Asian markets Japan is the only foreign economy not benefiting from yesterday’s USD weakness.  The Yen strengthened, the opposite of what Prime Minister Abe wants, and bonds posted extremely thin trading with 30 year bonds having zero trades in overnight sessions.  The Japanese stock markets are down significantly and industrial production data posted its largest drop in 5 years.  All of this is happening despite Abe saying he will introduce further stimulus before the summer as Japan can’t catch a break.

In other news the US ADP Employment numbers were good today coming in higher than expected which helped ease the pain for the USD slightly.  German CPI numbers were better than expected this morning and EU consumer confidence came in as expected which has helped propel the Euro even higher this morning after gaining strength on the tailwinds of Yellen’s speech.

EURUSD: Euro is up this morning on good German CPI numbers and a weaker USD.

GBPUSD: The pound is up this morning on USD weakness after Yellen’s speech.

AUDUSD: Aussie dollar is up significantly this morning on USD weakness and higher commodity prices.

USDCAD: Canadian dollar significantly stronger on USD weakness and higher oil prices.