While Yellen’s speech was perhaps similar to the March FOMC meeting press-conference, markets have focused on the overall cautious tone with respect to global risks and the lack of any hawkish hints similar to those coming from several regional Fed presidents last week, notes BNP Paribas.
"Our economists view the communication as consistent with their more dovish than consensus stance on the Fed and continue to expect that the Fed will stay on the sidelines through 2016 as first financial market conditions and, later in the year, a slowing US economy stand in the way of any further policy tightening. Rates markets now discount a 30% probability of a 25bp hike in June, with a full hike only priced by February next year.
Against this backdrop, we remain comfortable with our view that EURUSD will firm to 1.16 in Q2.
We also expect a subdued end of this week for the dollar as our economists are forecasting a below-consensus and below-trend 180k gain in March payrolls on Friday," BNPP argues.
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