Dollar slips on Yellen comments, retail sales eyed

The US dollar Index has come under further pressure and the
currency has weakened after comments from Janet Yellen on Friday
where she reiterated the need for further stimulus. Looked at as
having a dovish tone, markets reacted negatively to the
announcement and most currencies strengthened against the dollar.
Emerging market currencies also saw a sustained run on optimism
that further monetary stimulus will spur the flow of cheap money
propping up their markets, despite Yellen adding later that the
Federal Reserve does weigh in the risks to the global recovery due
to further asset purchases.

At this crucial juncture, comments from Fed members Dudley,
Plosser and Kocherlakota later today will be the focal point for
market sentiment trading on any updates on the Fed’s ‘tapering’
program. Given that scaling back does not look imminent, the US
dollar could extend its losses. With no economic data out from the
US today, markets will keenly await retail sales figures later in
the week.

Mario Draghi’s rate cut for the Eurozone has brought down the
EUR/USD pair to under 1.35 with analysts concluding that the recent
strength in the Euro was starting to affect exports from the bloc.
For now, the ECB will monitor what effect the rate cut has had on
liquidity and credit growth and if it isn’t too significant, Draghi
may look at the implementation for a renewed LTRO scheme. The only
bit of economic data out from the Euro region is the German house
price Index later today.

Sterling has erased its recent losses against the greenback
after Yellen’s comments and currently GBP/USD trades at 1.6125 this
morning. In terms of economic data a very quiet start to the week
but public borrowing figures are out later in the week after the
MPC meeting minutes, where Chancellor George Osborne is likely to
announce increased activity and the strength of the economy as the
sustained recovery gathers steam.