Yet most of the members remain a little nervous, despite the likes of strong employment reports and other positive metrics, and want more positive data before they’ll pull the trigger on higher rates.
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Treasury yields rose in overnight trading on Fischer’s comments but fell back in early trading. With the sudden increase, the index is on pace to end a five day series of losses. USA 2-year treasury yield is up more than 4 percent today and trading at 0.78 percent.
The price of crude oil has recently benefited from optimism that a meeting of oil-producing nations next month could lead to curtailed production. “The Fed has left the markets more confused than ever, in our opinion, and it is likely that the speech by chair Yellen at the Jackson Hole event will be more long- term focused and not provide enough clarity on the next hike”.
Gold hit a two-week low and silver fell to its lowest in seven weeks on talk of possible USA rate hikes.
CURRENCY: The dollar gained to 100.78 yen from Friday’s 100.22 yen. Gold fell on Monday to its lowest in more than a week as the dollar strengthened, before recovering slightly.
The lack of direction on Wall Street partly reflected uncertainty about the outlook for interest rates ahead of a speech by Federal Reserve Chair Janet Yellen later in the week. Hong Kong’s Hang Seng added 0.3 percent to 22,997.91 and Seoul’s Kospi advanced 0.9 percent to 2,017.94.
Can the Fed pull-off a relatively benign “dovish” rate hike in September? That measure rose to about 50 percent for December, from 46.2 percent, according to the CME Group’s FedWatch tool.
“But while there is the risk of some stale liquidation, we believe the landscape of negative/low real interest rates, unprecedented monetary stimulus and persistent economic headwinds continue to provide a supportive environment for gold”, Moore said.
To take note of in that regard, some market commentary on Monday was again calling attention to the price of funds on the interbank market in the wake of the previous Friday’s fixing for the three-month United States dollar London Interbank Offered Rate at 0.81711%, which marked its first weekly decline since June. “Fischer didn’t necessarily state when the Fed has made a decision to hike rates, but his remarks seemed to be alluding that a rate hike might be round the corner”, said Craig Erlam, a senior market analyst at OANDA.
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On a related note, in a research note sent to clients on 19 August economists at Bank of America-Merrill Lynch wrote: “We expect growth to modestly undershoot BoE forecasts and so expect the central bank to cut rates again, to 10bp, in November”.
