UBS - This Week's Key Points: Yellen unlikely to row back from Fed tapering

UBS - "In the week ahead Federal Reserve Chairwoman Yellen appears before Congress and Bank of England Governor Carney will present the February Inflation Report. (...) policymakers in both the US and UK are likely to signal interest rate increases will still only start from next year.

That will temper rallies in the dollar and pound. But we expect the greenback still to outperform this year as the Fed steadily cuts its pace of quantitative easing. The Fed's slowing balance sheet expansion will remain the key driver for currency markets. In contrast, the European Central Bank and the Bank of Japan remain reluctant to ease monetary policy further in the near term (...)

This week's key points for currencies are:

- Yellen unlikely to row back from Fed tapering
- reluctant Draghi keeping euro range-bound
- BoJ still not signaling further near term easing likely
- Inflation Report to keep BoE monetary policy dovish
- medium term outlook for franc remains bearish
- Australian payrolls key in the week ahead for commodity currencies"

Mansoor Mohi-uddin, Managing Director & Head, Foreign Exchange Strategy at UBS Macro Research

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