It’s been another wild ride for stock markets around the world today but the biggest action has been in gold and JPY through the second day of Fed Chair Yellen’s testimony to Congress. Capital continued to exit risk markets through the day particularly in Europe where the FTSE fell 2.3% and continental indices dropped 3-5%. US markets recovered into the close, however, particularly the NASDAQ 100 which had broken down in the morning, suggesting that selling pressure may be washed out. Gold had a huge day today driving for a $50 gain as it rallied toward $1,250 after clearing $1,200. Meanwhile JPY has had a really volatile day plunging toward 111.00 and then bouncing back in toward 113.00. Last year, USD was the currency of choice for traders looking for a haven to park their capital in turbulent times. Having fully priced in several interest rate hikes, however, USD appears to have reached its limits encouraging fearful traders to seek out cheaper havens. Today’s action was particularly interesting. Early in the day both gold and JPY soared, but then JPY turned sharply lower in what may have been in intervention from the Bank of Japan. Without a central bank to fight appreciation, gold kept on soaring, launching a second upleg about the time Fed Chair Yellen’s testimony resumed. Usually the second day of Fed testimony is a rehash of the first day and a non-event. This time was different. Wednesday, Dr. Yellen took a very neutral stance trying to keep her options open and trying to avoid crashing the stock market by going too dovish or igniting a dollar rally by going to hawkish. Today traders focused on her refusal to rule out negative interest rates in the US even though she also suggested a reversal of last month’s rate hike is unlikely. So what changed? Earlier Thursday, Sweden’s Riksbank cut its rate even deeper into negative territory, indicated negative interest rates are working for it, hinted at the potential for further cuts and threatened to intervene in forex markets Having defended her decision to raise rates and having indicated continued growth in the US economy, I don’t think the Fed is seriously contemplating negative interest rates. Rather, I think she was trying to send a message to the other central banks that the Fed is not going to stand idly by while everyone else tries to devalue their currencies. US companies, particularly multinationals have already been struggling with the effects of a higher Dollar. JPY has been screaming higher since Governor Kuroda introduced negative rates last month, the opposite effect of what one would expect from a dovish move. This may partly be due to traders thinking the Bank of Japan is done while the Fed could go more dovish, and may partly be due to the Fed trying to keep a lid on the Dollar. If JPY was to continue dropping back, this could help Japanese stocks on their return to trading. Gold and JPY have become particularly overextended of late and could be vulnerable to a swift correction with JPY already showing cracks. Similarly, markets that have been under pressure of late appear to be near selling climaxes. The NASDAQ 100 and WTI crude oil both broke down earlier in the day but managed to bounce back into the afternoon and claw back early losses. The way gold soared today I would have thought crude oil would have broken $25 but it didn't a sign the oil market may be getting washed out. There have been more rumours of supplier co-operation but so many of those have fizzled I won’t believe it until a meeting is actually held and even then people could cheat. Corporate News There have been no major announcements after the US close so far today. Economic News Significant announcements released overnight include: World Gold Council Q4 demand up 4% driven by central bank and investment buying, 2015 demand flat, supply fell 4% last year with both mine production and recycling lower. Investors sentiment has improved since start of 2016. Sweden interest rate surprise 0.15% cut to (0.50%) a 0.0% cut to (0.45%) had been widely expected US jobless claims 269K vs street 280K US natural gas (70 BCF) vs street (77 BCF) Upcoming significant economic announcements include: (Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore) 8:45 am AEDT NZ food prices previous (0.8%) 11:30 am AEDT Australia home loans street 3.0% 7:00 am GMT Germany consumer prices street 0.5% 7:00 am GMT Germany GDP street 1.4% vs previous 1.7% 8:00 am GMT Spain consumer prices street (0.3%) 9:00 am GMT Italy GDP street 1.2% vs previous 0.8% 9:30 am GMT UK construction output street 0.8% vs previous (1.1%) 10:00 am GMT Eurozone industrial production street 0.7% vs previous 1.1% 10:00 am GMT Eurozone GDP street 1.5% vs previous 1.6% 10:00 am GMT Greece GDP street (1.5%) vs previous (0.9%) 8:30 am EST Canada Teranet house prices street 6.2% 8:30 am EST US retail sales street 0.1% 8:30 am EST US retail ex auto street 0.0% 10:00 am EST FOMC Dudley speaking 10:00 am EST US U of Michigan sentiment street 92.3