FX markets got a jolt on Friday from Fed Chairwoman Janet Yellen. Taking the podium in Jackson Hole, Yellen talked tough on interest rates and the USD got stronger as a result. The EUR and GBP promptly sold off of their short-term highs.
The U.K. has a banking holiday today, but GBP traders could find some interesting values and opportunities in the FX markets. In trading thus far Monday, both the Sterling and Single Currency have shown that they are facing additional pressure. Europe will be very light with data today. The U.S. brings forward Personal Spending and Income statistics a bit later today.
The Federal Reserve caused volatility to come into the markets late on Friday before the weekend, and this coming Friday are the Non-Farm Employment Change numbers from the States. This week and next are essentially the last weeks of summer holiday. Next week the U.S. celebrates Labor Day, but that doesn’t mean investors can rest easy.
Next week could prove interesting for EUR investors with the ECB Minimum Bid Rate and Press Conference on the schedule for September the 8th. Germany via its bank officials have more than hinted in the past couple of days, that they do not want to see interest rates kept low for the EUR over an extended period of time. However, the ECB has more than one nation’s interest to consider when deciding upon their interest rates.
The Bank of Japan was also active this weekend. Upon Japan producing worse economic data via manufacturing and inflation reports last week, the BoJ came out and said that it will act if needed to further intervene in the Japanese economy. Whether the results will be good is certainly an area for debate, but the BoJ seems hell bent on creating the belief that it could harden its negative interest rate stance.
The Nikkei traded positively on Monday and the JPY did get weaker against the USD, but is this a short term reaction to what could conceivably be a situation that grows worse for Japan economically? All the Central Banks have rather troublesome problems to deal with including the Federal Reserve.
While Janet Yellen spoke in a rather hawkish manner on Friday, economic data from the GDP didn’t beat expectations. The result of a 1.1% gain is not indicative of a very strong economy. The Fed seems to be basing much of its belief on jobless numbers. The Revised Consumer Sentiment came in below expectations on Friday from the University of Michigan. And while the Core Durable Goods Orders did better on Thursday, the Flash Services PMI disappointed. Meaning that a mixed bag of economic data continues to come from the States.
There is a long road ahead for the global economy to achieve equilibrium and stable growth again. Global markets are certain to remain interesting because of the conditions and circumstances facing investors.