Investing.com - Here are the top five things you need to know in financial markets on Thursday, November 17:
1. Fed Chair Yellen goes to Congress
Federal Reserve Chair Janet Yellen is due to testify on the economic outlook before the U.S. Congress Joint Economic Committee on Thursday at 10:00AM ET (15:00GMT). Her prepared remarks are scheduled to be pre-released at 8:00AM ET (13:00GMT).
She will likely be asked how tax cuts or fiscal stimulus under President-elect Donald Trump could affect the economic and interest rate outlook.
Her comments will be monitored closely for any new insight on policy. The Fed left interest rates unchanged earlier this month, in a widely expected decision, but signaled it could hike in December as the economy gathers momentum and inflation picks up.
Besides Yellen, New York Fed President William Dudley and Fed Board Governor Lael Brainard will also be speaking at public events.
There is also important data due Thursday. CPI, building permits, housing starts, the Philly Fed survey and weekly jobless claims are all due at 8:30AM ET (13:30GMT).
Investors are currently pricing in around an 86% chance of a rate hike at the Fed's December 13-14 meeting, according to Investing.com's Fed Rate Monitor Tool.
2. Dollar pulls back from 14-year high as Treasury yields ease
A rally in the U.S. dollar showed signs of fatigue early on Thursday, after the greenback hit its highest level in nearly 14 years against a basket of major currencies the day before, as U.S. bond yields pulled back from multi-month highs.
The dollar index was last down 0.25% at 100.12 by 5:50AM ET (10:50GMT), after climbing to 100.59 the day before, a level not seen since April 2003.
Meanwhile, the yield on the U.S. 10-year Treasury was down 2.5 basis points at 2.198% in early trade, pulling back from a 10-month high of 2.302% set earlier in the week.
The dollar's rise moved in step with the surge in U.S. yields in recent sessions, as markets wagered that increased fiscal spending and tax cuts under a Trump administration will spur economic growth and inflation, which would ultimately lead to an era of higher interest rates.
3. Bank of Japan tests new firepower
The Bank of Japan on Thursday launched its first special operation to buy an unlimited amount of Japanese government bonds at a fixed price in order to maintain its yield-curve target.
The central bank announced two operations, one to buy two-year notes at minus 0.09%, and another for five-year debt at minus 0.04%.
Yields on two-year and five-year Japanese government bonds fell Thursday after the BOJ’s announcement. The 10-year yield also briefly fell to 0.006% after hitting as high as 0.029% earlier in the morning.
This was the central bank's first bond operation since September when it adopted a new policy framework targeting 10-year government bonds, a sign of its concerns over recent rises in yields.
4. Mexico rate decision on tap
Mexico's central bank is expected to deliver a bigger-than-expected interest rate hike on Thursday in a bid to support the peso after the currency was hammered to a record low by last week's election of Donald Trump as U.S. president.
The central bank is forecast to raise its benchmark interest rate by 50 basis points to 5.25% at the conclusion of its policy meeting at 2:00PM ET (19:00GMT) Thursday. Some analysts are even betting on a 75-basis-point hike.
The peso was driven past 20 pesos per dollar last week, its biggest two-day loss since a 1995 devaluation. The currency ended down nearly 9% on the week and its deep slump could fan inflation higher.
5. U.K. retail sales jump most since 2002
U.K. retail sales surged much more than expected in October, as colder weather boosted clothing sales and supermarkets cashed in from Halloween, lifting annual sales growth to its highest in more than 14 years.
The Office for National Statistics said that retail sales increased 1.9% in October from the prior month. Analysts had expected retail sales to rise 0.4%.
Compared with a year earlier, sales volumes were up 7.4% last month, the biggest annual rise since April 2002, reinforcing the robust picture of health given by British consumers since June's vote to leave the European Union.