Yellen re-emphasises Fed’s stance

Yesterday’s markets

26th February 2015

  • GBP Mortgage approvals 36.4k
  • BoE Carney speaks
  • Fed chair Yellen speaks
  • USD New home sales 481k
  • ECB President Draghi speaks
  • NZD Trade balance 56m

Yesterday was all about the Central Banks again as the heads of the Fed, Eurozone and BoE all addressed the market. Overall, news was relatively limited as Yellen, Draghi and Carney reiterated their stance and steered clear of any ground breaking announcements. Carney re-iterated his stance from the Quarterly inflation report, Draghi testified on the ECB annual report and Yellen continued her dovish tone from Tuesday’s testimony as she addressed the House Financial Services Committee.

Yellen’s key points were in line with her recent dovish tone. The Fed chair said the FOMC would signal a rate hike with a change in its forward guidance by dropping the word ‘patience’ from their statement. Once this is done the FOMC is more likely to raise rates at any meeting. Finally, she re-emphasised data dependency for a hike in rates and signalled that long term unemployment is still too high.

Yesterday’s economic docket was light with the only pieces of notable data being the BBA mortgage approvals from the UK and new home sales across the pond. Firstly, mortgage approvals increased and beat expectations, albeit marginally from 35.8k to 36.4k, this is the first time this reading has exceeded market consensus since July 2014. New home sales in the US sold at a faster pace than forecast in January at 481k, just shy of last of December’s six year high of 482k. A bullish sign for the US economy, signalling that the housing industry in the States is beginning to stabilise.

Today’s markets

25th February 2015

  • GBP Second estimate of GDP 0.5%
  • GBP Preliminary business investment
  • CAD CPI
  • USD CPI
  • USD Core CPI
  • USD Unemployment claims

Today’s docket sees a raft of high tier data released. German consumer climate is expected to climb this morning. This is followed by the UK’s second reading of GDP, forecast to remain at 0.5%. In the afternoon we have US CPI, durable goods and the weekly unemployment claims number.