EUR/USD
The euro fell against the dollar on Wednesday after Federal Reserve Chari Janet Yellen said a day earlier that interest rates could rise sooner rather than later if the labor market improves, which bolstered the greenback. Yellen told lawmakers in a Tuesday hearing that interest rates could rise sooner rather than later if the labor market continues to improve, especially given her observations that small-cap, biotech and other momentum stock valuations appear "stretched" these days. Yellen was set to appear before the House of Representatives later Wednesday, though the dollar already priced in Fed expectations for rates to rise sooner if the economy improves or remain on hold if slackness persists, while stimulus programs should wrap up around October.
GBP/USD
The pound slid but held range bound against the dollar on Wednesday on Federal Reserve Chair Janet Yellen's upbeat take on the U.S. economy. Yellen told Senators in a Tuesday hearing that interest rates could rise sooner rather than later if the labor market continues to improve, especially given her observations that small-cap, biotech and other momentum stock valuations appear "stretched" these days, which firmed demand for the greenback. Meanwhile in the U.K., the Office for National Statistics said that the claimant count, or the number of people claiming unemployment benefit, fell by 36,300 in June, exceeding expectations for a decline of 27,000. Mayâs figure was revised to 32,800 from a previously reported decline of 27,400. The unemployment rate declined to 6.5% in the three months to May, from 6.6% in the previous three months.
USD/JPY
The yen was at one week lows after Federal Reserve Chairwoman Janet Yellen indicated that rates could rise sooner than expected if the economy continues to improve. The dollar strengthened after Ms. Yellen said interest rates could rise sooner more quickly if the labor market was to improve more quickly than expected. However, the Fed chair also said that if the economic recovery disappoints monetary policy would remain accommodative. The remarks came during testimony to the Senate Banking Committee in Washington. Ms. Yellen said the economy is continuing to improve but added that the recovery is not yet complete and reiterated that rates are likely to remain on hold for a considerable period after the bankâs quantitative easing program ends.
USD/CAD
The U.S. dollar rose to its highest level in three weeks against the Canadian dollar on Wednesday after the Bank of Canada left its overnight rate on hold, in a widely anticipated decision. The bank said the recent increase in inflation was due to temporary factors rather than any change in domestic economic fundamentals. In its rate statement, the central bank said its monetary policy stance was neutral and added that the future direction of monetary policy would be data dependent. The BoC also revised down its forecast for economic growth saying it now expected growth of around 2.25% during 2014â“2016. The greenback remained supported after Federal Reserve Chair Janet Yellen indicated Tuesday that rates could rise sooner than expected if the recovery in the labor market continues.