Article / 26 August 2016 at 7:00 GMT

Morning Markets: Yellen's moment — what will she do?

Managing editor, / Saxo Bank



  • Eurozone July M3 money supply and lending                       (0800 GMT)
  • UK second estimate GDP q/q                                                (0830 GMT)
  • US Federal Reserve’s Chair Janet Yellen speaks             (1400 GMT)

If Federal Reserve chair Janet Yellen remains true to form, then her keynote speech to fellow central bankers at the Jackson-Hole summit will perhaps leave traders scratching their collective heads again as they search for clues on the Fed's intentions.

The surprising ramp up in Fed talk in the last week or so led by vice-chair Stanley Fischer's weekend's comments that edged September back on to the table for an interest-rate move nevertheless does indicate that something might be stirring in the august body.

It's difficult to imagine Yellen, never the most inspirational speaker at the best of the times, delivering a call to arms but while September appears to soon, she just might open up the path — a highly caveated path it has to be said — for a move in October or more likely December.

If she delivers even that, then moribund dollar ought to get a lift. As we enter the European session, USDJPY was bumping along the 100.50 area, EURUSD was pulled to the 1.13 zone and GBPUSD was making a fair stab at establishing a grip above 1.32.

Of course, a dovish performance from Yellen and then she'll land responsibility for the fate of USDJPY in the hands of the beleaguered Bank of Japan which will almost certainly have to take action if the pair dives sharply below the 100.0 handle.

September is a 32% chance for an interest rate move, according to Fed Funds futures. Bookie's favourite December is at 57%.

Elsewhere, gold is still bobbing above the key support at $1,310/oz and Brent and WTI are once again established above $49.50/barrel and $47/b respectively. Most of the major indices were in retreat 
with Japan's Nikkei hit by a core inflation disappointment for July, ahead of the Fed chair's speech. 

Yellen must be getting nervous. Time to deliver.

Market signals

Asian session

  • Japan's core inflation fell for the fifth straight month – down 0.5% in July from a year ago
  • The Nikkei fell on the news at the start of trading and was down 1% at 0500 GMT
  • At the same time, the Shanghai Composite and Hang Seng were both up about 0.6% 
  • Asian markets were relatively quiet ahead of Janet Yellen's speech later today
  • Vale expects the Samarco mine it owns with BHP to restart operations in mid 2017
  • Saudi energy minister tempers expectations for a production freeze

Forex ahead

  • The JPY was relatively flat against the dollar, trading at 100.47 in Asian trade
  • USD in tight range ahead of US advance GDP print
  • Short-term USDJPY Calls in demand for Tuesday/Wednesday strikes

From the Floor

Hawks of Wyoming. "I think the Fed wants to move", says Garnry

Event horizon. "We need to get past Yellen's speech for any bond market action", says Boye

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Janet Yellen's speech is undoubtedly today's most important event today, writes Juhani Huopainen. The September rate hike is still in play, but now is the time to signal it.

ASX in suspense
The Fed may be 10,000 miles away but the ASX doesn't like uncertainty any more than other markets, and was pushing the red ink this morning writes Saxo's Australian team

Strange bedfellows

US presidential candidate Donald Trump and former UKIP leader Nigel Farage may share an anti-establishment style, but that's about all they share, says Martin O'Rourke.

Copper on the brink

Copper has long been viewed as a key indicator for global growth and demand, and as of right now it is tanking. Should investors take this as a warning sign, asks Ole Hansen?

After the summit

At the moment, markets cannot seem to see beyond Friday's speech by Fed chair Janet Yellen, but what are the risks involved in trading the Jackson Hole event wonders John Hardy?


 Yellen takes the fast route to Jackson Hole and
possibly towards a new rate-hike indication. Photo: iStock

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