Have you ever thought about which meeting in March is more important than the rest? Let me answer your question – the performance of Janet Yellen at 18:00 GMT. Yes, the words of the Fed Chairman from the podium will again set the tone for trading in all markets. But why? Last week, Yellen announced that the rate hike will take place in the near future, if the economy continues to grow as expected. Stable growth in employment and inflation within the normal range are key indicators for changing interest rates in the near future, and so far everything is going according to plan. Yellen’s last comments were called “hawkish”, they shook the markets and increased the likelihood of a rate hike in March. “I can’t tell you at which meeting the increase will take place – it could be in March, May or June,” Yellen said. The last time Yellen spoke before Trump’s speech to Congress. However, today she will focus on the president’s speech, relying on his words, the chairman will decide how to tell the market whether the regulator is ready to start tightening the screws in monetary policy. President Donald Trump said his administration is developing a draft phenomenal tax reform that will relieve pressure on the middle class and business. He also promised to reduce the influence of the state on some sectors of the economy, saying that oil prices should fall. Analysts did not find in his speech any details of the tax reform, about which he speaks so much, and which first lowered stock prices, and a day later not only restored prices, but also pushed them to record levels. Trump’s statements are undoubtedly important to the Central Bank of the United States. However, economists want to get more than just words from the president; they are waiting for real economic indicators in order to assess the extent to which Trumponomy affects the country. To date, investors do not have much data on which to draw any conclusions and forecast the actions of the Reserve System under the new administration. This week a huge number of Fed representatives were interviewed. Most of them supported the idea of a rate hike, but a stronger influence on investors was made by Fed member Lael Brainard, who said that the rate change would take place very soon. And this is very strange, because the voting member of the Fed, Brainard, as a rule, adheres to rather restrained rhetoric. Bidding based on Yellen’s speech: Hawk: We buy dollars, we sell gold. If Yellen continues to adhere to the hawk tone, then investors should adhere to the trading strategy, which provides for a possible rate increase in March. Pigeon: Sell dollars, buy gold. If the chairman’s tone changes, it’s wise to move to a safe haven and invest in gold, which is likely to grow amid a weak dollar and market uncertainty.
Review prepared by Fort Financial Services Research Department. Follow our publications!