Market Drivers September 25, 2015

Yellens speech sends USD/JPY soaring
EUR finds support ahead of 1100
Nikkei 1.76% Europe 2.59%
Oil $45/bbl
Gold $1142/oz

Europe and Asia:
No data

North America:
USD Final GDP 8:30

USD Revised U of M 9:55

The dollar put on a show in Asian and early European trade today in the aftermath of Janet Yellen’s speech that suggested that December rate hike was highly probable.

In a speech in late New York yesterday Ms. Yellen said that she expects a rate hike later this year noting that the FOMC does not expect recent global financial developments to affect the policy path. She noted that US economic prospects were generally solid and that holding rates near zero too long risks abrupt tightening later on.

It was a much more hawkish speech than the presser just last week and may have been a response to the wide criticism of the Fed for staying too dovish in the face of generally positive US economic growth. It may have been also an attempt by Ms. Yellen to clarify the FOMC position and make sure that the market fully appreciates that the Fed intends to normalize policy over the near term horizon.

The dollar saw a modest bump in early Asia trade but the rally gathered steam and USD/JPY eventually broke the 121.00 barrier rising more that 100 points on the day. EUR/USD also saw some selling and dropped to a low of 1.1116 but found support ahead of the 1.1100 figure and then was lifted by EUR/GBP demand to trade back towards the 1.1175 level.

Today’s US GDP and U of M data are simply final revisions of the prior releases and as such are not likely to have much impact on trade but any upward surprise would only bolster the dollar bullish tone and could help propel USD/JPY towards 121.50 as the day progresses.