Jackson Hole provides little in the way of monetary policy update

30 August, 2017, 01:40 | Author: Regina Lloyd
  • Janet Yellen chair of Board of Governors of the Federal Reserve System left and Mario Draghi president of the

"The rise should lead average hourly earnings slightly higher on a year-on-year basis to 2.6 per cent v 2.5 per cent", TD said.

Kristian Rouz - A mysterious operation on the global gold market ahead of US Federal Reserve Chair Janet Yellen's speech sent gold prices lower, with roughly two million ounces being traded within one minute. Bank of Japan Governor Haruhiko Kuroda, in a Bloomberg Television interview, said that the recent pace of growth in the world's third-largest economy is probably unsustainable and pledged to continue with very accommodative monetary policy "for some time" because inflation is still too low.

Monday, August 28, the Euro-dollar exchange rate reached a value of $1,20 a record high from January 2015.

Investors continued their glass half-full approach to the Euro and half-empty to the Dollar, so when Yellen and Draghi opted to speak exclusively about economic regulation and the dangers associated with any de-regulation in the current climate, Euro bulls cheered the ECB Presidents decision not to take the opportunity to talk down the Euro, believing this to be further indication that he is reasonably comfortable with the current level the EUR is trading at.

In parallel, gold futures for December expiry shot up by 1.12% to $1,330.20/oz. on COMEX as the greenback fell by 0.74% against the Japanese yen to 108.44, which is traditionally seen as a safe haven currency.

One reason that Yellen deliberately avoided discussing monetary policy is that she - along with other top Fed officials - is perplexed about stubbornly low inflation. "As a result, the dollar fell almost 1% against the euro to 1,192".

"Markets (were) disappointed with the Yellen speech and they sold the dollar and pushed bond yields down", said Imre Speizer, markets strategist at Westpac. The Russian national currency kept...

Another key driver of the Euro appears to the reluctance of the European Central Bank to talk the currency lower. The report showed that the United States dollar is poised to weaken - potentially pushing the gold prices up in the near-term - with speculator net-short bets against the greenback having risen to $9.4 billion in the past week, compared to $8.84 billion the week before.

Indeed, Yellen's speech left the impression that the Fed will abstain from an interest rate hike in September - always a good sign for stock market speculators. This event was the reason for the weakening of the US currency. She announced the achievement of the dual goals of inflation and gave a few soft comments on the future policy of the fed.

But in the short term, the rising tide of prolonged liquidity provision is lifting most boats. Markets are expecting core inflation to remain unchanged from July - any pull back could weigh on overstretched Euro positions.

Restrained and largely dismissed the controversy of the fed and the European Central Bank says that everything important will be said in the early autumn.

This indicated to traders that the bank's policy plan was on track and that monetary policy would begin to be normalised over the next half a year.


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