Both Yellen and Draghi refrain from commenting on monetary policy, triggering a USD sell off
The Greenback was sold aggressively through the weekend as Janet Yellen’s refrain from mentioning monetary policy was taken as a dovish sign by the market. ECB President Draghi also avoided monetary policy in his official speech, however he was relatively dovish in the Q&A session stating that a “significant degree of monetary accommodation is still warranted” and that the Eurozone economic recovery is “not as progressed as it is in the US”. In reality it appears that it’s the Trump administration and political risk associated with the debt ceiling that continues to undermine the Greenback, as opposed to risk of a narrowing EUR/USD yield spread. It is still very much our expectation that the Federal Reserve will lead the other major Central Banks in the process of monetary policy normalisation.
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