She didn’t absolutely rule out a rate hike at the June meeting, but it is a possibility that most economist now are betting heavily against.
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“Yellen left all options on the table as she highlighted firmer economic momentum while characterizing the latest employment flop as “disappointing” and “concerning” – though she cautioned “that one should never attach too much significance to any single monthly” piece of data”, BNP Paribas analysts wrote in a note.
On Monday, Yellen said interest rate hikes were likely because “positive economic forces have outweighed the negative” for the United States, though the weak jobs report bears watching.
CURRENCIES: The euro was flat at $1.1358 while the dollar rose 0.5 percent to 107.15 yen.
The probability of a June rate hike fell to 4 percent, and a hike by July fell to 27 percent, according to the CME group 30-day Fed Fund Futures.
Without referring to any particular date, she said, “I continue to believe that it will be appropriate to gradually reduce the degree of monetary policy accommodation, provided that labour market conditions strengthen further and inflation continues to make progress toward our 2 percent objective”.
Yellen explained in her speech today, “While the general picture of the labor market is largely positive, some people are still struggling”. Hong Kong’s Hang Seng added 0.4 percent to 21,036.24, and the Shanghai Composite edged down 0.2 percent to 2,934.10. They weakened a bit during Yellen’s remarks, but rose further as investors concluded that the Fed won’t raise interest rates again until it is certain higher rates won’t stall the economy.
The Treasury Department auctioned $31 billion in three-month bills at a discount rate of 0.285 percent, down from 0.340 percent last week.
“I intend to continue to pay close attention to developments in this area”, she said.
But Yellen said the May jobs report – which she also described as “concerning” and a “surprise” – raised some key questions that she and her colleagues “will be wrestling with”.
Yellen laughed and in unusually blunt language for her said, “I’m sorry, I’ve got nothing for you on that”. US produced crude was up $1.05, or 2.2%, to $49.67, once again closing in on the key $50 per barrel mark. Two- year yields saw their biggest drop in eight months, while benchmark 10-year yields declined by the largest amount in four months, after government data showed the USA economy added just 38,000 new jobs (http://www.marketwatch.com/story/ us-gains-just-38000-new-jobs-in-may-2016-06-03) in May. Its stock lost 9 cents, or 6.4 percent, to $1.32.
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BREXIT FEARS: The other big scheduled event this month that has the potential to cause big jitters in the markets is the June 23 referendum in Britain over the country’s future in the European Union.
