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New Federal Reserve Chairman = weaker USD?

New Federal Reserve Chairman = weaker USD?

There are 2 big events today starting at 3pm today with UK GDP prediction for the last quarter followed by the Federal reserve’s FOMC minutes. The day actually starts with a raft of minor UK data so we expect GBP to be fairly volatile today.

However the biggest news on the wire is that that Janet Yellen will today be confirmed as Barack Obama’s successor to Ben Bernanke as Fed Chairman. The US president is expected to announce his nomination of Janet Yellen as Fed chairman at the White House at 7pm GMT, shortly after the above mentioned FOMC minutes. The news is unlikely to add any strength to USD with the ultra dovish Yellen unlikely to aggressively taper the Fed’s USD85bn-a-month asset purchase programme.

Why do we always refer to the economic calendar and data releases?

In the simplest terms possible, the value of a currency is typically a consideration of the return achieved for holding that currency (the interest rate). The value of one currency versus another (the exchange rate) is therefore the a consideration of which provides or will potentially provide a better return. The economic calendar is a schedule of events that have the potential to alter the markets opinion of future interest rate movements and therefore is effectively a list of waypoints at which exchange rates can fluctuate. Of course there are a myriad of non economic and unplanned events that can also alter the exchange rates, but the economic calendar is the starting point.

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