Friday July 14, 2017 - 17:44:39 GMT
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Fed Chair Yellen Softens Her Policy Stance
John M. Bland, MBA
Fed Changes Its Policy Signals Once Again
Trying to nail down current Fed policy is like shooting at a moving target. The week just past saw what might have been Chair Yellen’s final Congressional appearance as head of the central bank, as it currently seems as though she will not be reappointed early in 2018. The items the market zeroed in on were in her prepared text. Keep in mind that her prepared text was written to convey precisely whatever message the central wanted to send to the markets. They were not offhand comments made to a member of Congress in response to a question.
Chair Yellen indicated that economy continues to grow slowly and that it is adding jobs due to steady household consumption and a recent jump in business investment. She also asserted that the economy is strong enough to absorb both further gradual rate increases along with a slow wind-down of the Fed's massive bond portfolio. Yellen stated that given current estimates, the federal funds rate "would not have to rise all that much further" to reach a neutral level that neither encourages nor discourages economic activity in her prepared testimony. The focus of the Fed has turned back to its inflation target. She said while the recent weakness in inflation reflects transitory factors, that inflation has been running under their 2% objective, and maybe there could be more going on there. She reiterated these inflation worries again on Thursday.
Markets React Positively Markets were surprised once again by the newly dovish tone of her statement following a fairly hawkish Fed line from the meeting just over a month ago. Equity and fixed Income markets were pleasantly surprised by the positive stock and bond price implications that could come from more generous than expected Fed policies. The Wednesday session saw the USD the dollar pretty much fall against all the majors.
Amazing Trader EVENT RISK Calendar:
Mon 17 Jul
02:00 CN- GDP
Tue 18 Jul
08:30 GB- CPI
09:00 DE- ZEW Sentiment
Wed 19 Jul
12:30 US- Housing Starts/Permits
14:30 US- EIA Crude
Thu 20 Jul
01:30 AU- Employment
08:30 GB- Retail Sales
11:45 EZ- ECB Meeting
12:30 US- Weekly Jobs
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland,
co-founding partner, www.global-view.com
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