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Yellen unlikely to support the greenback – BTMU

FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, expects the USD to weaken in the very short term.

Key Quotes

"Fed Chair Yellen’s speech unlikely to support US dollar The foreign exchange market has remained relatively stable in the Asian trading session. After strengthening modestly in July, the US dollar has since stabilized so far in August with the dollar index failing to break decisively above resistance at around the 81.50 level."

"The US dollar has lost upward momentum alongside the fall back in US yields which has been partially offset by lower yields outside of the US as well. The two-year US Treasury bond yield has declined sharply from a peak of 0.58% at the end of July to 0.41% at the end of last week."

"The main focus in the week ahead from the US will be a keynote speech from Fed Chair Yellen on Friday at the Jackson Hole symposium. The title of the speech is “Labour Markets” which is one of Fed Chair Yellen’s specialist subjects."

"We do not expect the speech to signal a shift in the Fed’ s monetary policy stance and is more likely to explore in more detail their views on the labour market from their last monetary policy meeting at the end of July. The Fed signalled at their last meeting that labour market conditions have improved. However, a range of labour market indicators suggests that there remains significant underutilization of labour resources."

"Fed Chair Yellen is also viewed as being at the more dovish spectrum of the Fed especially with regards to the amount of slack still in the labour market. As such Fed Chair Yellen’s speech is unlikely to prove supportive for the US dollar in the near-term signalling that there is still plenty time before the Fed needs to begin tightening monetary policy despite strengthening labour market conditions."

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