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Yellen effect lingers as investors brace for second appearance

Will Janet Yellen double down on Wednesday’s dovish remarks when she appears before a Senate committee later on Thursday?

That is the question investors were pondering in early trading, after equity markets rose and bond yields fell in the aftermath of Ms Yellen’s appearance before the House financial services committee on Wednesday.

Ms Yellen is set to appear again before the Senate finance committee later today.

Following her remarks on Wednesday the yield on 10-year US Treasuries, which moves in the opposite direction to its price, touched the lowest level in a week.

“This week has so far been kind to investors with more subdued oil prices and a relatively pedestrian set of comments from Fed’s Yellen, helping pull down core market yields and boost risk appetite,” says UBP strategist Koon Chow.

“However markets are not through the woods as today Yellen gets her second chance to manage market expectations and on Friday the release of US CPI will demonstrate whether the recent dip of inflation is, as the Fed claims, ‘temporary’.”

Yields on European government debt were flat early trading after mixed inflation data from some of the eurozone’s largest economies, with the two-year Bund yield up 1 basis point.

Peripheral yields drifted higher; the Spanish 10-year was up 1 basis point.

The dollar is slipping as investors continue to factor in the latest signals from the Fed. The euro and sterling both strengthened, with the euro up 0.18 per cent against the dollar and the pound rising by 0.43 per cent.

The dollar index, a measure of the greenback against a basket of peers, was 0.2 per cent weaker at 95.578.

International benchmark Brent crude was down 0.4 per cent at $47.54 a barrel after settling 0.5 per cent higher on Wednesday following a higher-than-expected fall in US crude stocks.