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2 Jul 2014
Fed’s Yellen speech eyed - RBS
FXStreet (Bali) - The RBS FX Team shares their view on the upcoming speech by Federal Reserve Chief Janet Yellen, noting that the USD downside that may result from a dovish interpretation is more limited than the potential USD upside on a hawkish surprise.
Key Quotes
"At the June FOMC meeting, the FOMC made no changes to the forward guidance language and Fed Chair Yellen presented a still-dovish outlook for monetary policy in her press conference. Her discussion of financial stability at the press conference was limited – she noted the FOMC monitors financial stability risks “very, very carefully”."
"She continued to say that “while I would never take off the table that monetary policy should –could in some circumstances respond [to financial stability concerns], I don't see [financial stability concerns] shaping monetary policy in an important way right now.”
"While financial stability was clearly not the focus of her press conference, the IMF speech entitled Financial Stability offers an opportunity to expand on that discussion."
"We expect this underlying message, ie, monetary policy should be the last line of defense for financial stability concerns, to be maintained and for no major alarm bells to be sounded on the financial stability front."
"Across the pond, Governor Carney’s hawkish shift in light of rising housing market imbalances and financial stability concerns has increased intrigue over whether Chair Yellen will take a similar turn."
"At this stage, the FOMC appears more concerned about a recent stagnation in the housing market than signs of overheating. As expectations for Chair Yellen’s speech likely already lean in the dovish direction, perhaps the USD downside that may result from a dovish interpretation is more limited than the potential USD upside on a hawkish surprise."
Key Quotes
"At the June FOMC meeting, the FOMC made no changes to the forward guidance language and Fed Chair Yellen presented a still-dovish outlook for monetary policy in her press conference. Her discussion of financial stability at the press conference was limited – she noted the FOMC monitors financial stability risks “very, very carefully”."
"She continued to say that “while I would never take off the table that monetary policy should –could in some circumstances respond [to financial stability concerns], I don't see [financial stability concerns] shaping monetary policy in an important way right now.”
"While financial stability was clearly not the focus of her press conference, the IMF speech entitled Financial Stability offers an opportunity to expand on that discussion."
"We expect this underlying message, ie, monetary policy should be the last line of defense for financial stability concerns, to be maintained and for no major alarm bells to be sounded on the financial stability front."
"Across the pond, Governor Carney’s hawkish shift in light of rising housing market imbalances and financial stability concerns has increased intrigue over whether Chair Yellen will take a similar turn."
"At this stage, the FOMC appears more concerned about a recent stagnation in the housing market than signs of overheating. As expectations for Chair Yellen’s speech likely already lean in the dovish direction, perhaps the USD downside that may result from a dovish interpretation is more limited than the potential USD upside on a hawkish surprise."