Dovish Yellen Boosted Stocks, Sent Dollar Lower

US equities were boosted to another record high overnight while dollar pared some recent gains on Fed chairman nominee Yellen's dovish comments. The Dow rose 70.96 pts to close at 15821.63, close to intraday high of 15822.98. S&P 500 rose to 14.31 pts to 1782.00, at day high. Both were new record for the indices. Treasury yield dipped mildly with 10 year yield closing down to 2.725% while 30 year yield closed down to 3.829%. The Dollar index dipped through 81 level and is back at 80.86 at the time of writing. In the currency markets, the greenback is losing ground against other major currencies except yen and aussie from the weekly perspective.

Current Fed Vice Yellen will have her confirmation hearing for the chairman post in Congress today. The prepared speech was released in Fed's website yesterday. Yellen noted that, "we have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession." And she emphasized that "a strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases." Yellen also noted that unemployment is "still to high" as the economy performed "far short of their potential". Inflation is also expected to stay below the 2% target. "for some time". Some analysts noted that the comments reduced the prospect for a December tapering. But should economic data comes as positive a recent GDP and NFP, Fed might still taper by a small step before March meeting.

In the eurozone, ECB governor Praet said in a WSJ interview that the "balance-sheet capacity" of ECB "can also be used" to reduce borrowing costs in the private sector. And that includes "outright purchases that any central bank can do". Also, ECB could also adopt negative interest rates if it need to lift inflation closer to the 2% target. Nonetheless, he also signaled that additional stimulus isn't needed right now after last week's rate cut.

Sterling stays firm against euro after yesterday's BoE inflation report. The BOE signaled in its quarter inflation report that it might raise the policy rate in as soon as 3Q15 as the economy has recovered "robustly" and inflation moderated. The BOE acknowledged that the economy is growing at the "fastest pace in 6 years" and confirmed that "the recovery has finally taken hold". Yet, the central bank also reminded that a sustained recovery, which requires a revival of business investment and price stability, is needed to put people back in work and use up the slack in the economy". The unemployment rate is increasingly likely to reach the 7% threshold, the triggering point for the central bank to begin thinking about hiking the Bank rate from a record low 0.5%. The British pound strengthened and gilts fell after the BOE report amid heightening speculations of tightening. More in BOE Expects Rate Hike to Come in 3Q15, Earlier than Previous Forecast of 2Q16.

On the data front, Japan Q3 GDP grew more than expected by 0.5% qoq, slowed from 0.9% qoq in Q2 but beat expectation of 0.4% qoq. GP deflator dropped -0.3% yoy, better than consensus of -0.5% yoy. New Zealand business manufacturing index improved to 55.7 in October but retail sales rose less than expected by 0.3% qoq in Q3. Eurozone GDP will be the main focus in European session while UK will also release retail sales. Swiss PPI will also be featured. US will release jobless claims, non-farm productivity and trade balance. Canada will release new housing price index and trade balance.