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Yellen sent USD under pressure, but EURUSD not expected to break current range

Currency Analysis

Yellen sent USD under pressure, but EURUSD not expected to break current range

26/02/2015

Having seen the USD come under pressure despite a relatively neutral tone from Yellen at her testimony to the Senate earlier this week, US data this afternoon has potential to prompt further USD weakness with headline CPI expected to fall into negative territory, said analysts at Lloyds Bank.

While the market may see through this as temporary (given recent comments from the FOMC), the core print will have to hold firm to stave off further downward pressure on USD. For EUR/USD, 1.1260-1.1450 marks the near-term range.

Recent rhetoric from Bank of Canada Governor Poloz has prompted the market to pare back expectations of a rate cut at next week's policy meeting (4 Mar), Lloyds Bank's experts added. 2yr rate spreads have now moved in favour of CAD, and are back in line with USD/CAD. Canadian CPI could attract some interest this afternoon, headline inflation is expected to fall to 0.8% y/y in January; however, core CPI is expected to remain firm.

Source: Lloyds TSB