Fed: Focus of Yellen’s speech is likely to be mechanical and longer-term in nature - ANZ

Research Team at ANZ, suggests that Fed Chair Janet Yellen’s speech at the Jackson Hole symposium is much anticipated.

Key Quotes

“The focus of her speech is likely to be mechanical and longer-term in nature.

• She may add to recent Fed speak which is saying that the market is “under-pricing” the likely degree of Fed tightening.

• If Yellen does join her colleagues in jawboning, this could be a source of volatility for markets.

• This could spark renewed USD strength against EM and APAC currencies. Other noticeable reactions in a ‘risk off’ scenario could see USD underperformance against key majors, higher bond yields, and a tightening in financial conditions.

• This is unlikely to prove to be a persistent source of volatility though, given the Fed is taking an extremely gradual approach to tightening.”