Tuesday, February 11, 2014

Yellen Testimony Plus GOP Debt Ceiling Deal Spark Risk Appetite

- Anybody expecting newly-installed Fed Chair Yellen to back off on tapering QE is disappointed this morning. Yellen's firm embrace of the Bernanke status-quo, plus the collapse of the House GOP's desperate attempt to extract concessions for a debt ceiling increase are encouraging risk appetite. As of writing, the DJIA is up 0.60%, the S&P500 is up 0.34% and the Nasdaq is up 0.35%.

- Yellen's prepared remarks before Congress this morning were unremarkable. Yellen pledged her support for current FOMC policy and emphasized that there would be a great deal of continuity in monetary policy - which the market understands to mean that the taper will continue unchanged. As Bernanke had repeatedly emphasized as "forward guidance," unemployment crossing the Fed's 6.5% threshold will not automatically lead to a rate hike but would only indicate whether it had become appropriate for the FOMC to consider whether the broader economic outlook would justify an increase.

- The greenback is a bit stronger this morning as Yellen's testimony continues. USD/JPY is at session highs above 102.55, while spot gold off its 4-month highs, around $1,282. The yield on the 10-year UST is up slightly, around 2.71%.

Source:  TradeTheNews.com 

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