Saturday February 6, 2016 - 12:19:50 GMT
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Yellen Testimony Critical
John M. Bland, MBA, CTA
My view last week that the Fed was in the process of resetting its monetary policy appeared to have been accurate. Fed voices have been using the phrase that "monetary conditions have tightened" fairly frequently recently. This is being taken as an indication that the central bank has been feeling less pressure to tighten conditions from current levels. I had mentioned in piece a week ago that I felt the EURUSD trading range was soon going to adjust higher to 1.10-1.15 in response to a less aggressive Fed and an economic slowdown in the U.S., and the market had already made that change in the middle of the latest week.
Confusing January Employment Report
The January employment released on Friday confused the markets. The data tempered some of the EURUSD bearishness. It saw a lower than expected monthly jobs report, but the unemployment report fell below the psychological 5.00% line to 4.90%. I was taught years ago by top economists to ignore the unemployment rate and to focus more on net job creation. With this year having seen special weather effects, I have been taking the data with a grain of salt due to inapproriate seasonal adjustment factors. As for the 0.5% jump in average hourly earnings, there was probably some catch-up after a zero increase in the previous month. Also, there were one-off increases in minimum wages in several states on January which distorted the data. I am already looking ahead to the February data for a cleaner jobs report. Even so, a mild winter should still continue to distort the seasonal adjustments.
The week ahead will see Congressional testimony by Fed Chair Yellen on Wednesday and Thursday. We should have a better feel for the current thinking at the Fed about policy by the end of next week and that could have a strong impact on market sentiment.
WEEKLY HIGH IMPACT NEWS:
15:00 US- Yellen Testifies
13:30 US- Weekly Jobless
15:00 US- Yellen Testifies
13:30 US- Retail Sales
15:00 US- University of Michigan (prelim)
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
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