Yellen Ups the Ante for Rate Hike…

A short-term interest rate hike recently got a vote of confidence at the Jackson Hole, Wyoming conference courtesy of Janet Yellen. According to Yellen, US jobs growth figures are encouraging and this increases the likelihood of rates rising before the December 14, 2016, meeting of the Fed. In fact, Yellen indicated that rates could rise as soon as Wednesday, 21 September 2016. According to the CME Group FedWatch tool, the likelihood of the Federal Funds Rate rising to 0.50% – 0.75% is now 33%. The likelihood of interest rates remaining as they are at 0.25% – 0.50% is 67%.

Among others, Yellen alluded to payroll gains and robust consumer spending as drivers of economic growth in the economy. Yellen and the FOMC remain confident that the Fed will hit its 2% inflation target within the coming years. The Jackson Hole, Wyoming conference was presented by the Kansas City Fed and it was Yellen’s speech – Designing Resilient Monetary Policy Framework for the Future – that drew global attention. Analysts look for indications about upcoming Fed policy at the Jackson Hole, Wyoming pow-wows every year.

1 – Trading Opportunities: USD/JPY Turns Bullish

The Jackson Hole, Wyoming speech by Janet Yellen threw markets into a flutter. Analysts, economists, and speculators were eagerly awaiting this speech at the 2-day event, and the general mood appeared to indicate an increased likelihood of a rate hike. This had a mixed effect on markets, and volatility returned to global indices and currency markets. Yellen’s positive assessment of the US economy had a negative effect on indices, but it helped to boost the USD. This is evident in the sharp uptick for the USD/JPY currency pair.

The Fed has been increasingly hawkish of late, especially sentiments by New York Fed President, William C. Dudley. The USD/JPY pair appreciated by 1.27%, or $1.27 to close at 101.8100. The pair is clearly bullish over the past 5 days, having spiked from 100.1540 on Friday, 26 August at 3:20 PM to 101.9370 by 7:45 PM that evening. With the Fed meeting just three weeks away, and sentiment largely bullish, we can expect the USD/JPY pair to retain its momentum.