Saturday April 2, 2016 - 11:48:06 GMT
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Fed Chair Yellen Roils The Markets Again
John M. Bland, MBA, CTA
Policy Normalization on Hold
The major event in the week just finished was a speech given Tuesday by Fed Chair Yellen to the NY Economic Club. There was a lot of uncertainty about what she might say after several FOMC members in the previous week had taken a hawkish posture following an unexpectedly dovish policy statement after the latest FOMC policy board meeting. Some had even implied that the markets had misinterpreted her policy statement. Om Tuesday, Chair Yellen surprised observers by being even more dovish than after the FOMC and in a sense, she rebuked the policy "hawks" by not even acknowledging them. Yellen got high marks from some analysts for taking finally charge of the central bank. In no uncertain terms she made it clear that she is who you to listen to when it comes to monetary policy.
Yellen sent the clear message that policy "normalization", i.e., raising interest rates, is on hold for the time being. There is a growing unease at major central banks that low growth, low inflation and near-zero (and below) interest rates could become entrenched. Central bankers are not that worried about the risk of rising inflation because they have the tools at their disposal that can contain rising prices. On the other hand, there is not much monetary authorities can do to force growth.
Current Market Conditions
March U.S. employment data were stronger than expected and partially neutralized for the day the change in Fed monetary policy. Other data released over the session were constructive as well. Dealers report that they still feel the central bank will keep rates steady in April, even though some were already starting to question the timing of the Fed policy change.
Over the weekend, Australia and New Zealand clocks will "fall back" due to the change of seasons.
WEEKLY HIGH IMPACT NEWS:
00:00 AU/NZ Clocks Fall Back One Hour
00:00 CN- Holiday
03:30 AU- RBA Decision
All Day Final Service PMIs
14:30 US- EIA Crude
18:00 US- FOMC Minutes
12:30 US- Weekly Jobless
12:30 CA- Employment
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