European markets are set to build up their gains on top of the yesterday’s gains. We are convinced the main focus among traders will be the Fed chairwoman’s testimony. Janet Yellen, will be addressing congress today about the health of the economy and such is not an easy task at all when it comes to satisfying the lion’ den.
At the same time, investors will also be waiting with bated breath, and try to gauge her primary focus, as the new Fed chairwomen. We think that she will give a lengthy speech to satisfy the congress, and keep the lid on the volatility in the market at the same time, but there may not be much information in that speech, as she may choose to keep her cards close to her chest.
If you are thinking that she may withdraw her support for tapering during her testimony, then clearly you could be on the wrong side of the market, because given that, she did support Bernanke in December and January for further tapering, we think that she is going to continue tightening the liquidity tap. However, she may not rush into any decision, and may want to see another job’s report ( which is due anyway before the fed meet next) before she comes to any conclusion. Whatever is the case, she will be grilled in the congress today and if she shows any kind of nerves, about the job market or on economic growth, we could say that we may see a rally in the stock market, as many traders may start to price in the lowering of forward guidance. On the other hand, a more confident or more optimistic approach, may lead to a stronger dollar and perhaps a little weakness in the equity market.
Finally, the last element for focus will be her negotiating skills within the chamber, as we still have the debt ceiling issue unresolved and the deadline has lapsed.
Back in Europe, the economic docket is very much empty today, so the main focus will be Ms Yellen’s testimony. However, we had the retail sales data yesterday for the UK, which clearly has overthrown any concerns about the slowdown in the retail industry and this momentum could keep the market pushing higher today as well.
Disclosure & Disclaimer:
The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader. by Naeem Aslam