Currency Markets Stable Ahead Of Fed Speech

Today’s speech by Janet Yellen could either be a big nonevent or it could outshine Ben Bernanke’s speech at Jackson Hole several years ago. Mr. Bernanke put the Kansas City Fed event on the radar of the global press. Janet Yellen could elevate the event to the “Academy Award” level. Global traders and bankers, investors and politicians, business man and hedge fund managers will be glued to her every word. The US dollar opened the day on a down note at 94.64 near the bottom of its trading range indicating that markets are not expecting Yellen to be very hawkish. Gold added about $2 in the Asian session as traders took advantage of yesterday’s decline to buy up the cheaper commodity ahead of today’s speech.  Gold is trading at 1327.05.

The euro is trading within a tight range just under its highs at 1.13. This morning it is holding few points gain as the greenback dipped. The EUR/USD is trading at 1.1289. The French, Italian and German leaders will discuss the debt issues which have engulfed the entire zone. Each nation is worried they could soon be forced out of power, amid growing pressure on the European Union which major concerns over migration and the economy. Eurozone economic activity edged higher in Aug’16 with few signs that Brexit-linked dangers were yet hurting the European economy.

The pound has recovered some of its losses to reach 1.3206 as traders wait on preliminary GDP numbers due in a few hours. The pound has been outperforming as post Brexit data has been better than expected.  Sterling Pound fell by 0.3 percent in yesterday’s trading session. The reason for the same could be attributed to the recent strength in the currency that prompted the traders to book profits. Moreover, lack of economic data releases from the nation kept the trading volumes a bit light. According to credit ratings agency Moody’s, Britain’s economy will slow down but should not go anywhere close to a recession as growth in the rest of the world is also “stabilizing.”

For the past two three days, Asian market equities have been trading on a mixed note as growing apprehensions in the market to make any big bets has led to subdued trades. The annual conference in Jackson Hole, Wyoming started on Thursday. The S&P/ASX 200 dipped 0.1% and South Korea’s Kospi   dropped 0.4%, but Hong Kong’s Hang Seng Index gained 0.6%. The Shanghai Composite   traded higher by 0.1%.

In Japan, the Nikkei Stock Average   was down 0.9%, with automobile and insurance stocks hurt by expectations that Yellen would deliver gloomy news about the U.S. economy. That would push down bond yields and weaken the dollar. Lower yields reduce insurers’ returns. A weaker dollar pushes the yen higher, hurting export competitiveness.

Marketwatch reported that Japan’s Core Consumer Price Index — which excludes fresh food — slid 0.5% from a year earlier in July, following a revised 0.4% drop in June. That was greater than a 0.4% fall forecast by The Wall Street Journal and the Nikkei.

This prompted speculation that the Bank of Japan may have to lurch back into action, to reignite inflation in the world’s third-largest economy.

But it is possible to put a positive spin on events — Japanese consumer confidence may be rising as prices fall and wages inch higher. Renewed confidence might eventually be good for Japan’s reflation project, say analysts.

“In Abenomics since 2013, price rises preceded wage increases, so households couldn’t feel the economic recovery, however finally a rise in real wages should improve their feeling,” said Societe Generale economist Takauji Aida.

The Japanese yen is trading at 100.47 down by 6 points but within its trading range. The Australian dollar gained to 0.7630 up by 12 points and the kiwi added 9 points to 0.7309.