FX roundup: Sterling, dollar mildly higher after hawkish Yellen speaks

Sterling was mildly higher Thursday afternoon on most major crosses after US Federal Reserve chair Janet Yellen hawkishly said the central bank needed to be forward looking when setting policy.

At about 17:01 GMT, sterling was up 0.05% to $1.2449 and up 0.43% to €1.1688. The dollar-spot index was ahead 0.22% to $100.630 in the wake of Yellen's speech.

She said the Fed needed to be mindful of the risks that might be inherent in keeping rates low beyond their past-due date. She also appeared to have joined the camp of those who believed another rate hike might be appropriate soon.

"Were the FOMC (Federal Open Market Committee) to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the Committee's longer-run policy goals.

"Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability."

ETX Capital markets analyst Neil Wilson noted there was -- barring a quiver in US Treasury yields -- little major impact stoked by Yellen's words.

"The fact is a December (US) rate hike has already been priced in –- markets think there is a roughly 90% chance the Fed will increase the target federal funds rate," said Wilson.

"It now looks almost impossible for the Fed not to raise rates next month –- it's painted itself in a corner and has to respond with a hike or all hell will break loose in the markets."

Sterling was firmer against the currencies of Australia, New Zealand, South Africa and Japan.

Key events in the diary include the upcoming Fed meeting and the UK Supreme Court ruling on triggering Article 50 of the Lisbon treaty.

HL Currency Service senior analyst Chris Saint noted the pound's rise -- including a sortie above $1.25 -- followed expectation-trouncing UK retail sales figures.

UK consumers continued to spend freely in October, surprising most economists. Retail sales volumes jumped 1.9% month-on-month, handily beating estimates for a rise of 0.5%.

"The data suggests UK consumers remain unfazed by June's EU referendum amid robust labour market conditions, coming hot on the heels of new figures yesterday showing that unemployment is at an 11-year low," Saint said in a statement.

But, the UK and US currencies fell versus the Canadian unit. The oil exporter's loonie tracked crude prices higher on renewed hopes OPEC will strike an output deal at its Vienna meet.

The dollar also firmed versus the euro, aussie, kiwi, rand and yen.

"The US dollar index steadied near 14-year highs around 100.5 on Thursday. Janet Yellen’s testimony and a raft of strong economic data reports saw the greenback reverse earlier small declines," said Jasper Lawler, market analyst at CMC Markets.

"This included a slight moderation in annual core inflation to 2.1% as well (as) housing starts jumping 25.5% to a year high and the lowest weekly unemployment claims since 1973."

On the data front, inflation in the euro-area was 0.5% on the year in October, up from 0.4% the month before, the highest reading in 28 months, according to Eurostat figures. Consumer prices were up 0.2% last month in the single-currency bloc.

Across the Atlantic, US initial jobless claims unexpectedly fell 19,000 from the previous week to 235,000 on 12 November 2016, when economists had been expecting a slight rise to 257,000.

US' headline consumer-price index (CPI) advanced 0.4% month-on-month in October and was up by 1.6% year-on-year, versus a rise of 1.5% in September, the Bureau of Labor Statistics said. Core CPI rose 0.1% during the month.

Markets were also expected to keep close tabs on the results of the first meeting between US President-elect Donald Trump and a foreign leader, Japan prime minister Shinzo Abe.