It was another week of strong risk aversion in the markets as last Friday’s NFP data was quickly shrugged aside. Gold, Yen and the Euro gained over the week with Yellen’s testimony offering little support for the Dollar. At the time of writing, the US Dollar remains the weakest currency while the Japanese Yen is up by over 3.00% for the week, followed by the Swiss Franc.

The week opened on a soft note with no major releases on Monday and Tuesday and China being closed for the most of this week on account of the Lunar holiday. The markets remained flat initially but by Tuesday’s NY trading session open, the US Dollar saw a strong sell-off leading to risk aversion. Equity markets were tracking Crude Oil prices which touched a 13-year low this week briefly trading near $26.05 before managing to pull back higher.

In the UK, industrial and manufacturing production data for the month of January remained weak losing -0.20% and -1.10% respectively. The British Pound eased back after last week’s strong rally near the 1.46 handle and was seen trading sideways for the most part of this week. The flat GPB, however, helped EUR/GBP to test the highs of 0.78 over the week.

Janet Yellen’s testimony was the main event of the week. In her opening remarks, she noted that the recent economic turmoil warranted a gradual and a cautious pace of rate hikes. She ruled out any rate cuts and rather blamed the recent market turmoil on the lack of communication from China and the PBoC. When asked if the December rate hikes were anything to do with the current market conditions, Ms. Yellen noted that the December rate hike was well communicated and that the markets remained largely calm for nearly two weeks after the Fed hiked rates.

More interesting, the US Senate testimony from Yellen also saw the topic of negative interest rates being discussed. For the moment, however, the Fed remains unclear on the legality of introducing negative rates. But the fact that NIRP or Negative Interest Rate policy was being discussed certainly seemed to touch the nerve for investors who continued to shun the risk assets.