Dollar Mildly Softer In Consolidations, Yellen Confirmed As Fed Chair

US equities extended recent pullback with the Dow closed mildly lower by -0.27% while S&P 500 was down -0.25%. Asia stocks, on the other hand, are mixed with Nikkei down -0.52% but mild recoveries are seen elsewhere. The dollar was soft overnight after services data and stays in range against European majors in Asian session, as well as commodity currencies. The yen also lost some upside momentum and turned sideway. Overall, markets are in consolidative mode. Dollar and yen maintains some mild upside bias against European majors. Commodity currencies are still mildly bearish against the the greenback, but we'd possibly see short term bottoming in Canadian and Australia in case of another fall.

In the US, Janet Yellen's nomination to be Fed chairman was confirmed by Senate with 56-26 votes. Yellen will become the first woman to to head Fed and will replace Bernanake on February 1. US president Obama said in a statement that "with the bipartisan confirmation of Janet Yellen as the next chair of the Federal Reserve, the American people will have a fierce champion who understands that the ultimate goal of economic and financial policymaking is to improve the lives, jobs and standard of living of American workers and their families." Senate banking committee chairman Johnson said "Americans should feel reassured that we will have her at the helm of the Fed as our nation continues to recover from the Great Recession."

In Eurozone, Bundesbank vice president Sabine Lautenschlaeger is expected to be appointed to ECB executive board to replace Joerg Asmussen. Asmussen quitted last month for a job in the German labor minstry. Finance Minister Jeroen Dijsselbloem, who leads Euro ministers, said that no other canadidates were put forward. ECB will meet later this week and is widely expected to keep policies unchanged. President Draghi will likely reiterate the forward guidance to keep rates low for an extended period of time. Meanwhile, there is basically no expectation for ECB to launch another rond of LTRO.

Released from Australia, trade deficit narrowed more than expected to AUD -118m in November, comparing to consensus of the AUD -250m. Exports jumped 10.7% yoy while imports dropped -1.3% yoy. The rise in exports was driven by 15.7% yoy exansion in non-rural goods while contraction in import was attributed to sharp fall in capital goods by -13.0%. Recent depreciation in the Aussie's exchange rate would likely help soften improt consumption more and provide some support to exports. There are talks in market that RBA would have another rate cut by 25bps to 2.0% this year and the move would drive the AUD/USD to 0.8 level. Technically, from our perspective, we'd expect the AUD/USD to have strong support above 0.8 to stage a sustainable medium term rebound after the next fall.

Looking shead, Eurozone data will feature German unemployment and Eurozone inflation. PPI and CPI will be released and in particular, CPI flash is expected to show 0.9% yoy rise in December. US will release trade balance later today while Canda will release trade balance and Ivey PMI.