Janet Jump – USD rises on Yellen’s hike talk despite

Fed Chair Janet Yellen says that the case for a rate hike has strengthened in recent months. The Fed nears employment and inflation goals. However, she also says that fiscal policy could  enhance economic stability, aka,  the government should do more. In addition, she laments the Fed’s ability to see into the future. And of course, Yellen says that everything is data dependent.

While Yellen is more upbeat on the economy, there is no smoking gun for a rate hike in September. Any minor data disappointment either from the NFP, retail sales or a few other  figures could serve as an excuse not to raise rates.

Currency reaction to Jackson Hole speech

The dollar initially  strengthens with Yellen’s “strengthens” regarding the case for a hike, but then falls down when the full  speech is digested. Update: after the initial wobble, the dollar began rising and rising, enjoying a winning streak.

• EUR/USD is falling from above 1.13 to 1.1240 before bouncing back to 1.1270. Update: a full turnaround is seen with a jump to above 1.1330. Update: the dollar surge sent it under 1.12.
• GBP/USD is around 1.3210, down from the highs. Update: 1.3130 is the new low level.
• USD/JPY is at 100.60, above previous levels. The pair eventually leaps to 101.85.
• USD/CAD is trading around 1.2880. Dollar/CAD conquers 1.30 in the aftermath.
• AUD/USD is relatively stable at 0.7660. Aussie/USD slips to 0.7550.
• NZD/USD is  at 0.7350, sliding from the new highs it broke to earlier. Well, also this surge failed with a crash to 0.7225.

The US dollar is stronger  initially, but the  gains do not persist.

EUR/USD falls on  Yellen’s speech – chart

Quite a move: the pair fell to 1.1240 before jumping towards 1.1330. Here is the drama on the 1-minute chart. Euro/dollar does not move so much in recent days.

Jackson Hole Background

Fed Chair Janet Yellen is speaking at the annual Jackson Hole Symposium in Wyoming. She is accompanied in this event by other Fed officials and by BOJ Governor Kuroda. Yellen is usually dovish and prefers a “wait and see” approach over acting and raising rates too soon. Many expected a dovish speech and only a few saw a chance of a hawkish surprise, aka a heavy hint of a rate hike in the upcoming meeting.

The next meeting of the FOMC is scheduled for September 22nd. The event consists of fresh forecasts and a press conference. Following a few upbeat comments from several Fed officials, some expect  the  Fed to raise rates in this meeting.  This is supported by data released this week, including a  jump in new home sales  as well as a bump up in durable goods orders.

On the other hand, not all data has been positive: retail sales badly disappointed and inflation is not going anywhere fast. In addition, the presidential elections are looming and the Fed will not want to be seen as intervening in the electoral process.

Here is a video preview of the highly anticipated Jackson Hole event: