Originally published by AxiTrader
The US dollar is trading at the highs for the day after Fed chair Janet Yellen's speech to the Commonwealth Club of California hit the news wires.
Janet said the economy is "close" to full employment which reinforces the message that we have been getting from other Fed speakers, such as governor Lael Brainard yesterday, that the economy is already strong even before the addition of any stimulus from Trumponomics.
That suggests higher rates in the US and reinforces the central bank policy divergence which has been so much a part of the US dollar's rally over the past few months. That's something Janet Yellen herself noted put upward pressure on the US dollar during the Q&A section of her speech.
As I write US 10-year treasuries are now up 9 points on the day to 2.41% and the US Dollar Index has rallied to 101.14 from yesterday's low around 100.30.
Here's the USD Index hourly from my Reuters Eikon terminal.
Naturally Yellen said the pace of rate changes is dependent on the economy. But she also signaled the Fed, she and her colleagues, expect rates to rise for the next few years.
As a result of the above USD/JPY is now 1.45% higher from this time yesterday at 114.24, euro is down 0.75% at 1.0631, and the Aussie dollar is at 0.7505 down around 0.8%. Sterling, which was already giving back around 1% of yesterday's gains when I got to my desk this morning is off 1.25% at 1.2260.
Naturally now traders have a question to ask themselves.
Is the US dollar bullishness that naturally flows from a strong US economy and policy divergence between central banks as the Fed raise rates enough to temper Donald Trump's obvious dislike for a stronger dollar.
Long term I think it is.
But traders now need to decide whether they want to increase their bets again in what is still a very crowded long US dollar market.
You can read the full speech here.
Have a great day's trading.