Against a backdrop of firmer equity markets, Yellen still sees too much slack in the US economy to tinker with rates - ASX futures 24 points higher

The big news last night was the not so big news that came from Federal Reserve Chairwoman Janet Yellen, who testified before the Senate Banking Committee last night. Why not so big news? The market has been waiting for a solid indication of when the Fed might move away (upward) from its zero rate interest policy. But last night Yellen highlighted the that "too many Americans remain unemployed or underemployed, wage growth is still sluggish and inflation remains well below our longer-run objective." So she's certainly giving the market plenty of reasons to believe that earlier hawkish comments about rate hikes being drawn from simple equations based on unemployment and growth are no longer valid.

Regardless of how it's being reported, the market is going to place its bets on a rate hike further out than it did previously and--as we can see in today's first chart--the US dollar strength remains on hold. US consumer confidence came in lower last night, contracting with a print of 96.4 versus 99.5 expected, and this would also have helped push out bets of a rate hike. The market is presently pricing in a 50%+ probability of a US rate hike in October 2015. This will likely have the added effect of making the Reserve Bank of Australia more at ease about cutting its rate, but there are a couple of caveats to that - one is the housing market.

The Australian dollar (looking at today's second 10-minute AUDUSD chart) responded very positively to this news, chiefly due a touch of US dollar weakness combined with the fact that expected emerging differences between Australian and US interest rates are now more mild than they were before Yellen's testimony. The AUDUSD pair had softened into the European open yesterday only to pop back up from mid US$0.7740 lows to be trading at US$0.7830 as I write. While this time last week the Australian cash rate market was pricing in a 71% chance of a March RBA rate cut to 2.00% (next Tuesday), this has dropped now to 47% - a score showing it is no longer a probability. So we have limited guidance of what might happen with Australian cash rates next week - Sydney's 86% auction clearing rate last weekend will certainly tempt the RBA to exercise some caution!

ASX 300 companies reporting earnings today:
  • AGI    Ainsworth Game Technology
  • AIR    Air New Zealand
  • ASL    Ausdrill
  • AUB     Austbrokers
  • AWE    AWE
  • BCI    BC Iron
  • CHC    Charter Hall Group
  • CTD    Corporate Travel Management
  • CVW    ClearView Wealth
  • CWP    Cedar Woods Properties
  • ENE    Energy Developments
  • HGG    Henderson Group
  • IRE    IRESS
  • MET    MetlifeCare
  • MMS    McMillan Shakespeare
  • MVF    Monash IVF Group
  • PCT    Precinct Properties New Zealand
  • PGH    Pact Group Holdings
  • RHC    Ramsay Health Care
  • SAR    Saracen Mineral Holdings
  • SIQ    Smartgroup Corp.
  • SVW    Seven Group Holdings
  • SXY    Senex Energy
  • WFD    Westfield Corporation
  • WOR    WorleyParsons

Today‚Äôs charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Upcoming economic announcements: RBNZ Governor Wheeler speaks at Finance Select Committee at 10:40, HSBC Chinese PMI at 12:45, Yellen testifies to financial services committee at 2am, new US home sales at 2am, all Sydney time.

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