Fed testimony in a complex world
- Fed Chair Yellen makes her way to Capitol Hill. Her biggest challenge, perhaps, is to explain an increasingly complex economic structure to politicians who are in full on election mode post the New Hampshire primaries.
- Without being dismissive of market moves, Yellen is likely to emphasise that the real world economic picture of the US is not doing too badly. However, with the current Fed view indicating early rate hikes, she may need to manage policy expectations.
- Yen strength has been raising some questions, in the wake of the BoJ announcing negative rates. However, the capital flow mechanisms by which negative rates may weaken a currency apply only weakly in Japan's case, so the yen's position is perhaps less surprising.
- European industrial production data is due from several economies. This is of interest given the moderation of German data yesterday – the balance of domestic and overseas demand is also worth looking to.