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06 March 2017
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Markets take Yellen words as final confirmation

  • Written by SilkRose Fiscal Services LLP.
  • In category Blog.
  • 3 years ago.
Hot Hits: 936
 
What is the significance of the price action following Yellen's comments last Friday afternoon? The US dollar reversed lower, snapping streaks against euro, yen, and sterling.  US interest rates eased.  Did Yellen contradict the other Fed officials, including Governors, about the likelihood of a near-term hike?  
 
Yellen, in fact, confirmed the likelihood of a rate hike on March 15. She conditioned her statement on the US economic data to be broadly in line with the Fed's expectations. If anything, Yellen may have been a little more hawkish than generally recognized. It describing the current monetary stance, she said it was "moderately accommodative." Previously she said it was "modestly accommodative."  This may sound innocuous, but the Fed speaks in such nuances.  Although several Fed officials, including Yellen, deny the Fed has slipped behind the curve, there seems to be a sense that there is more accommodation that needs to be removed.
 
The market has taken the data and official comments to indicate with a high degree of confidence that Fed will hike this month.  However, it has not priced the likelihood of three hikes this year.  While the odds of a March move, according to Bloomberg calculations, rose from 40% to 94% chance in the past week, the odds of a third hike by year end is increased from about a one-in-four chance to a one-in-three.
 
There was a typically buy the rumor (that Yellen would confirm what nearly all of the other Fed officials have been saying) sell the fact (when she did) activity in a relatively thinly participated Friday afternoon in North America.  The dollar had moved higher for several session in a row, and the market had priced in a March hike by nearly as much as it could. NFP on coming Friday may bring little fireworks!
 
Silkrose Fiscal Serviecs LLP & Adroit Research Team 
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Disclaimer: The views expressed in this report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The author, directors and other employees of Adroit Financial Services Pvt Ltd and its affiliates cannot be held responsible for the accuracy of the information presented herein or for the results of the positions taken based on the opinions expressed above. The above mentioned opinions are based on the information which is believed to be accurate and no assurance can be given for the accuracy of this information. Adroit Financial Services Private Limited and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities mentioned in this report. This should, however, not be treated as endorsement of the views expressed in the report.Adroit Financial Services Private Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. SEBI Reg. No. INH100003084. Silkrose Fiscal Servies is an Associate Partner with Adroit Financial Servies Pvt Ltd since 2015. #silkrosefiscal is NOT registered with SEBI as Advisor. The updates are purely a view point / public domain news and there is no assurity on the returns. Hence all the members are requested to apply their prudence and consult their financial advisor before acting on any of the recommendations by the company. #SFSL is not responsible of any losses incurred (if any) by acting on the updates. All news shared by SFSL is meant for free view and the company does not earn revenues from sharing any public domain information.


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Disclaimer: SilkRose Fiscal Services LLP (SFSL) is registered As AP. The updates are purely a view point / public domain news and there is no assurity on the returns. Hence all the members are requested to apply their prudence and consult their financial advisor before acting on any of the recommendations by the company. SFSL is not responsible of any losses incurred (if any) by acting on the updates. All news shared by SFSL is meant for free view and the company does not earn revenues from sharing any public domain information.

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