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Markets await Yellen’s speech March 2016

With Federal Reserve chair Janet Yellen set to speak later today, all eyes are on the Fed to see if Dr Yellen’s commentary today is consistent with the shockingly dovish commentary she made at the last FOMC meeting.   With a backdrop of higher than expected inflation, better than expected employment and what appears to be some dissention amongst the ranks at the Fed, today is set to be a remarkable one as traders look to the Fed to set the tone after an extended Easter weekend.

Looking to Japan, all is not well in the land of the rising sun, with retail sales contracting 2.3% signalling that the domestic economy is returning to sluggishness despite the best efforts of Mr Abe and the Bank of Japan. With Japanese bonds trading in negative territory the yen has taken another knock against the buck, its 8th consecutive decline. Contrasting yesterday’s performance, the Shanghai index found itself in negative territory closing over a percent lower while the Chinese yuan moved higher versus the big dollar. Looking southwards, the Australian dollar is trading flat while the kiwi is up nearly half a cent against the greenback despite broad based softness in commodity prices.

As traders in Europe have returned to their desks after the extended weekend, trading has struck a tentative tone as the market awaits Yellen’s commentary.   Equities across the continent and in London are trading in the green while a relative lack of tangible data has not prevented both the pound sterling and the euro from gaining on the USD.   It appears that the pound is the stronger of the two with it also pulling away from its continental counterpart as Brexit fears abate, at least temporarily.

Ahead of the North American session, futures on the S&P signal that the positivity seen in European markets will not make its way to this side of the Atlantic, as both government bonds and lower crude prices confirm that traders have opted for a more defensive posture.   Despite the weakness in oil, the loonie has once again taken flight against its southern neighbour gaining nearly half a penny in the last twenty four hours as the latest shift in the USDCAD pendulum has yet to take place.   With Janet Yellen yet to speak, today is set to be an eventful one no matter what is ultimately said, such that corporates would be best placed to consult their dealing teams on the placement of market orders that would allow them to take advantage of any favourable spikes in currency volatility that may come their way.

Further reading:

Is there more room for Gold to rally?

Return of the Doves? All Eyes on Yellen