USD review

Quotes from RBC Capital Markets:

-USD: Yellen gives her semi-annual testimony to Congress on Tue/Wed. We think Yellen is unlikely to echo the dovishness from the minutes for two reasons: (1) since the meeting, we received not only a Q4 GDP report that had real consumer spending expanding at a 4.3% pace, but also perhaps the best employment report since 1997; and (2) Fed members from both sides of the spectrum continue to promote the idea of a mid-2015 lift-off.

-Also out this week is CPI (Thu). We look for a sharp decline of -0.7% m/m in Jan headline CPI. For Core prices, we estimate a +0.2% m/m increase, buttressed by the shelter component (but down 0.1%y/y). This could resurrect the "global deflation" narrative that has seemingly gripped the market for the last six months.

-The pushback to this idea, though, is the fact that gasoline prices bottomed toward the end of January and have rallied nearly 12% since then. Given this, we are already tracking a +1% seasonally adjusted advance in CPI energy for February. This cements the idea that the fall in the rate of headline inflation will prove, in the final analysis, to have been an isolated energy story.