Markets Remain Queit in Anticipation of Janet Yellen’s Speech

The currency market has shown major signs of inactivity recently as investor anticipation for Janet Yellen’s speech on Friday morning threatens to have a profound effect on the currency market, according to long time currency trader Boris Schlossberg of BK Asset Management.

The speech which will be given by the Fed chair is currently the highpoint of the Kansas City Fed economic symposium in Jackson Hole, Wyoming, is also one of the most highly anticipated fundamental event in the month of August. The issue on everyone’s mind is whether the Fed chair will be inclined to raise the key fed funds rate this year, or even imply it in her speech and mostly traders will also watch her sentiment to know if she will be comfortable with a rates hike not happening again next year.

Boris Schlossberg also stated that, "Any equivocation by Ms. Yellen will be met with a dollar rout in the FX market, stakes are higher than normal, the currency market is already, at best, skeptical that the Fed will raise rates this year," he also implied that the Fed chair’s failure to reassure traders will lead the USD to fall below 100 and most likely drop below the post Brexit low of 98. Given that the greenback is currently trading at 100.53 against the yen, which would represent a huge move for a major currency pair.

Over the course of the week, Fed Vice Chairman Stanley Fischer, Dallas Fed President Robert Kaplan, and the Kansas City Fed President Esther George have collectively implied that a rate hike this year is still in the picture for the Feds, and last week the New York Fed president William Dudley said that a September rates hike is still on the table.

"It seems unreasonable to expect Yellen [to] substantially deviate" from these views, Brown Brothers Harriman currency strategist Win Thin wrote Thursday. In fact, given that the symposium is entitled "Designing Resilient Monetary Policy Frameworks for the Future," Thin is sceptical that she will spend a great deal discussing "immediate issues" at all.

Stocks in Europe today maintained a tight range in as an uncertainty loomed over the markets stemming from the ongoing debate among Federal Reserve officials over the most appropriate time for a US rates hike.

Oil prices also slipped in early trade on Friday in the wake of the Saudi Arabian energy minister Khalid Al-Falih comments that he doesn't believe "any significant intervention in the market is necessary", in an interview with Reuters. Investors were hoping that a meeting between OPEC members next month could bring a freeze in production, but Al-Falih appears to have put an end to the speculation. “The fall in oil prices could also weigh on investor sentiment”, analysts said.