FRB Chair Yellen spoke Friday. In my view little new ground was broken however as written previously any Fed address can be of significance given their potential influence upon the financial markets.
Perhaps the most quoted remark from her address is “the ongoing improvement in the economy would warrant another interest rate increase in the coming months.” I view this comment as an explicit statement that rates will rise but not in June, perhaps hinting that if the data continues to improve at current pace, July is all but a given.
Yellen’s remarks had little impact upon the markets, trading that slowed to a crawl by the time she made her remarks because of the Memorial Day holiday.
This week can be of significance especially relating to the outcome of June’s Fed meeting especially if the data surprises on the upside. The first week of any month in filled with top tier statistics culminating with the BLS labor report.
As stated above I do not believe the I think the central bank will not increase rates at the June 14-15 meeting and err to the side of caution and postpone any action until July.
My rationale is simplistic. There will be another jobs report released by that date offering additional evidence to support such the rebound. Second, the outcome of the Brexit vote will be known.
However with the above written, if there is a series of downside surprises, the odds of a July hike will be greatly reduced.
What will happen today?
Last night the foreign markets were mixed. London was down 0.18%, Paris down 0.43% and Frankfurt down 0.42%. China was up 4.09%, Japan up 0.98%and Hang Sang up 0.90%.
The Dow should open little change ahead of a large data week that may indicate how ready the economy is for higher rates. The 10-year is off 5/32 to yield 1.87%.