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Forex: Dollar stronger ahead of Yellen’s Humphrey Hawkins testimony

Becalmed markets are just showing a few signs of life this morning with many dollar bulls expecting today to mark the start of the dollar’s very widely expected recovery. Janet Yellen will be making her first ever two day Humphrey Hawkins Testimony and the market will be listening carefully to see if her usual dovish tone has become any more hawkish in the light of improving labour market figures and inflation data. Just before Yellen we get US retail sales which are a key figure watched by the Fed, so anything stronger than the expected 0.6% should give the dollar a boost, but it may just be that Yellen maintains her dovish rhetoric and gains are reversed as she commences speaking at 15.00 London time.
The expected dollar turnaround has been given a little helping hand from the euro and sterling this morning with Mario Draghi once again committing himself to taking on full blown QE if required in his speech to the European Parliament yesterday and UK seeing soft retail sales data overnight. This retail figure comes on the back of a run of worse than expected UK economic data and so sterling is being put through its paces. This morning sees CPI figures from the UK which will also be closely watched for any sign that the Y on Y figure is returning back towards the BOE’s 2% target with a rise from 1.5% to 1.6% expected. However, with the aforementioned soft retail sales overnight and continued downward pressure on food sales a lower print could materialise and keep cable under pressure which trades at a new two week low of 1.7060 at the time of writing.

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