Yellen and Poloz Add Suspense
Market watchers came into the day hoping for hints about what the Fed and BOC would do in March but they left with more questions than answers. The loonie was the best performer while the kiwi lagged. It's a major day of Asia-Pacific data including the China manufacturing PMI. In today's Premium trade, we issued a new trade on a CAD pair after Yellen & Poloz speeches. Full details found on the Premium Insights.
We didn't get answers about what the FOMC will do in March but we got clues. Before the FOMC minutes it appeared exceedingly likely the 'patient' reference would be removed but Yellen highlighted low wage growth, international worries and low labor force participation.
The Fed seems especially cloudy on the inflation outlook. They want to look through the temporary oil dip and disregard breakevens but Yellen expressed some discomfort with both assumptions.
The US dollar was weaker across the board after the testimony with USD/JPY especially soft, falling more than a cent from the highs.
The Canadian dollar surged after a speech from Poloz indicated the BOC may not cut next week. The market has priced in an 80% chance of a cut but Poloz emphasized that the January cut gives the BOC some time to wait and see. He also characterised data since then as 'some good, some bad'.
One thing that was curious about Yellen's testimony was in the reference to weak foreign economies, the first one mentioned was China ahead of problem spots like Europe, Japan and Canada. Does the Fed know something?
We may find out more at 0145 GMT with the preliminary HSBC China manufacturing PMI for February. The consensus estimate is a slide to 49.5 from 49.7.
It's part of a brisk day of economic data that includes comments from Wheeler, Aussie skilled vacancies and the Australian Q4 wage cost index. Any of them could be major market movers.
|Markit Services PMI (FEB) [P]|
|57.0||54.1||54.2||Feb 24 14:45|
|Markit PMI Composite (FEB) [P]|
|56.8||54.4||Feb 24 14:45|
|PMI (FEB) [P]|
|49.5||49.7||Feb 25 1:45|
|Fed's Yellen testifies|
|Feb 25 15:00|
|Eurozone ECB President Draghi's Speech|
|Feb 25 14:30|
|Wage Price Index (Q4) (q/q)|
|0.6%||0.6%||Feb 25 0:30|
|Wage Price Index (Q4) (y/y)|
|2.5%||2.6%||Feb 25 0:30|
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