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U.S. Dollar Advances on Yellen

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On Monday, Federal Reserve Chair Janet Yellen gave a broadly optimistic assessment of the US economic outlook and said interest rate raises are coming. In general, Yellen said, "I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to overbalance the negative ones."

In this regard, Yellen said, while U.S. jobs report was "disappointing," and bears watching, policymakers will respond, "Only to the extent that we determine or come to the view that the data is meaningful in terms of changing our view of the medium- and longer-term economic outlook."

Yellen highlighted surprises could emerge that could change her expectations, and pointed to four major risks to the U.S. economy - overseas risks inflation, productivity, and slower demand. Yellen concluded by undermining them all and expected that "further gradual increases in the federal funds rate are probably appropriate."

Yellen was keen not to give any hints about when will interest rates rise, in contrast to a speech on May 27, when she said, “probably in the coming months such a move would be appropriate.”

U.S. dollar index pared its losses and traded above 94 levels. The pound declined to $1.4440, negatively affected by the EU referendum. From a technical point of view, the cable could decline further as the “Brexit” campaign closes gap to narrowest margin.

Yesterday, Gold pared its losses of the last week and traded at $1,245. The precious metal could touch resistance at $1,250 but it is hard to touch the next resistance levels of $1,267 this week.

Markets are likely to trade in a limited range this week in the absence of any major economic data. Traders should pay attention to FOMC meeting next week.

Oil prices touched a seven-month high, buoyed by a weaker USD. WTI traded below the psychological level of $50, while Brent crude traded at $50.

The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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