ForexLive Americas FX news wrap: Yellen wades back into the rate debate
Forex news for New York trade on May 4, 2021:
- Yellen: Rates might have to rise to keep the economy from overheating
- US March factory orders +1.1% vs +1.3% expected
- US trade balance for March -74.4 billion versus -74.3 million estimate
- Fed's Daly says she sees inflation spurt as being transitory
- Fed's Kaplan repeats call to "at least start discussing" taper
- New Zealand GDT price index -0.7%
- Canada March building permits +5.7% vs +1.5% expected
- Canada March international merchandise trade balance -$1.14B vs +$0.55B expected
- Gold down $15 to $1777
- US 10-year yields down 0.7 bps to 1.59%
- WTI crude up $1.21 to $65.71
- USD leads, NZD lags
- S&P 500 down 28 points to 4164
It was a lively day in markets with some sharp twists in just about every asset class. Right at the start of New York trade there was a quick wobble in risk that was never explained. There was some talk of Chinese fighter planes entering Taiwanese airspace but that's a stretch.
In the end, it was never explained but risk trades continued to deteriorate. Factory orders and other data points had little impact. There was some USD selling into the London fix, particularly in GBP and EUR.
Then things really kicked off right after the fix when Yellen -- sounding like she was in her old job -- said rates might have to go up. That set off some big moves right across the board with the US dollar jumping and equities taking it on the chin. You can see the damage in European stocks, which closed as things were getting ugly (DAX -2.5% in the worst day of the year).
The lows were short-lived. The context of her comments was that more spending and stimulus would inevitably lead to higher rates was slowly digested and AUD/USD eventually completed the 35-pip round trip. Stocks also found a late bid as the dip-buyers arrived late.
In all, we saw some 40 pip up-and-down moves but generally finished New York trade where we started. That leaves the US dollar comfortably higher on the day.