The market seemed to get confused last week between the noise and the signal and this confusion gave the dollar a bit of a reprieve. However, by the end of the week, the market seemed to be back on message.
Specifically, market sentiment swung from what was perceived as dovish comments at Yellen’s confirmation hearing to Fed can taper in December after reading the FOMC minutes. Similarly, speculation of a negative deposit rate in Europe triggered a quick decline in the euro. Surveys suggest that the perceived odds of Fed tapering this year are still low and Draghi and other ECB officials played down the likelihood of a negative deposit rate (though did not take it off the table entirely).