The big issue for today will be the testimony from the new Fed Chair Janet Yellen. This will be her first semi-annual testimony in front of the House financial services committee, which will include a written statement at 13:30 GMT, followed by questions later on. Yellen has often been viewed as one of the more dovish members of the Fed, so the main issue for the market will be how she sees future policy developing and on what grounds she would consider stepping back from the policy of tapering asset purchases which started in December. This could make for a choppy trading session for the dollar later on, especially if she wants to make her mark as the new chair, rather than continue in the same vein as her predecessor.
The main interest overnight has been with the push higher on the Aussie, back above the 0.90 level after data showed stronger business confidence and house prices. This follows on from the change in tone from the RBA earlier in the month, in which they removed their desire to see a weaker currency from their monetary policy statement. This takes the Aussie to the highest level for a month vs. the USD, whilst AUDNZD has held the higher levels gained towards the end of January. One of the more interesting moves seen so far this year has been the recovery in the price of gold, with a push to new highs for the year seen in the Asian session. Of course, this comes after what was a disappointing 2013, a year during which gold declined in dollar terms for the first time since 2000. What’s interesting regarding the moves we’ve seen so far this is that gold has been fairly oblivious to the gyrations we’ve seen in emerging markets and also developed market equities. Given that gold offers no yield, then sentiment plays a fairly pivotal part in the price action, together with what’s happening to real interest rates elsewhere, because a higher return elsewhere is harder for investors to give it up for the uncertainty of a non-yielding asset such as gold.