Markets stabilize as investors wait for Yellen testimony

Early yesterday, the Dollar steadied against its major peers as a surge in sovereign Bond Yields paused, with investors awaiting comments from Federal Reserve Chair Janet Yellen due today and Thursday, for fresh cues on policy direction.

Meanwhile, San Francisco Federal Reserve President John Williams said that it was a reasonable view to expect one more rate hike this year, and his own view was to start adjusting the Central Bank’s balance sheet in the next few months. He believed that a recent softening in US inflation was transitory and that inflation would pick up to 2% over the coming year.

This Monday, Sterling traded close to a two-week low with a run of lackluster data casting doubt over the Bank of England’s recent warnings that it is on the verge of raising borrowing costs. Meanwhile, BoE Deputy Governor Ben Broadbent was due to speak yesterday, giving investors a chance to hear the views of an interest-rate setter’s first public comments since a narrow vote to keep rates unchanged last month.

Yesterday as well, the Turkey’s Lira rallied, shrugging off a weaker than expected performance in the country’s industrial sector. Official statistics showed industrial production rose by a disappointing 3.5% year on year, down from 6.7% in April. The reading was lower than an average forecast of 5% growth compiled by Bloomberg.

Industry accounts for just over a third of the Turkish economy, which has bounced back strongly after contracting in the third quarter of the year. Having started 2017 as the world’s worst performing major currency, the Lira had gained poise to wipe out its losses by June. But investors have begun to sell the currency in recent weeks on concerns over febrile geopolitics in the region.