Fed rate hike confusion hits markets as Yellen speaks


29 March, AtoZForex, Lagos – Irrespective of the bank holidays, ample volatility was generated in the currency markets yesterday with the GBPUSD pair moving about 150 pips to the top side as the dollar lost ground on aggregate for the first time in seven days. The drop in the dollar came amid conflicting messages over the outlook for U.S. interest rates. Markets seem to be spooked ahead of a speech from Federal Reserve Chair Janet Yellen due today, and the long list of U.S. economic data due this week.

Fed rate hike confusion

As the Fed rate hike confusion hits the market, more conflicting economic data only makes it even more unclear. With the latest Gross Domestic Product (GDP) figure showing that the economy grew faster than previously reported last quarter, the report has been offset by data showing  personal spending barely increased in February.

This conflicting information adds another level of uncertainty into the US central bank outlook, after the Fed pointed last week that interest rates could be hiked as soon as the economic data warrants. With investor sentiment remaining fragile and concerns about slowing growth in China and emerging markets, markets remain on the edge as any unusual event could trigger a selloff, due to fragile investor sentiment.

With a sparse economic calendar for the day, we still expect reasonable volatility as banks open from Easter break, and markets will be paying attention the Federal Reserve chairman Janet Yellen’s speech, with emphasis being sought for Fed rate hike clues.

Yellen speaks (4:20 P.M GMT)

Today,  Fed Chair Yellen is due to speak about the “Economic Outlook and Monetary Policy” at the Economic Club of New York. Considering the current mixed outlook on when the next rate hike will come in the US, Yellen’s speech will be sought for further clues after a host of policy makers clarified last week that the central bank could hike as soon as April.

We also have the CB consumer confidence due by 2:00 P.M GMT. The data is forecast to show 93.7 reading, as survey respondents try to rate the relative level of current and future economic conditions including labor availability, business conditions, and overall economic situation. The dollar has lost steam after a seven day bullish run. We may see a continuation of the USD fall today. However, a lot will be dependent of Yellen’s speech and the coming data today.

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