Cautious Yellen sets tone ahead of March NFP

Relatively dovish comments from FED chair Janet Yellen have set the tone of the market, heading into Friday’s non-farm payroll report.

Her remarks are in sharp contrast to some other notable FED speakers, in this year’s board such as James Bullard, which helped last week boosted Dollar against major and emerging market counterparts.

According to her,

• Setback in market pricing of future hikes from FED in early this year has helped U.S. economy to remain broadly unscathed despite severe financial turmoil in January and February. So policymakers should approach with greater caution before hiking rates as global economy remains relatively weaker and FED has relatively low buffer to stimulate economy if it hits the brakes again.

• According to her, data released so far has been mixed. While positive developments were seen across several labor market indicators, manufacturing still suffering from lower global growth and stronger Dollar.

• On the inflation side, her remarks were cautious too, as it would be too early to say that recent increase in core components would be durable.

• Though U.S. economy, was relatively unharmed from recent financial market turmoil, its adverse effect could still lead to weakening global economy outside U.S according to Ms. Yellen, which might then adversely affect US. Economy viz. a viz. labour market.

All in all dovish bias in Chair Yellen, dis the trick for Dollar bears. Almost all, both developed and emerging currencies soared against Dollar. Dollar index dropped as much -0.8%. Today its down another -0.1%, trading at 95.1.

Equities except Nikkei 225, enjoyed rallies.

Focus now will be on Friday’s NFP report, especially wage component to see which camp the data favors – hawkish or dovish.