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Main » 2016 » August » 26 » Jackson Hole - What will Janet Yellen?
Jackson Hole - What will Janet Yellen?



Yesterday started the annual symposium in Jackson Hole - traditionally an important event, which will be attended by heads of a number of major central banks of the world, including the president of the Federal Reserve.



What says Jeanette Yellen? What it will give guidance? Depending on the answer to this question the players will adjust their forecasts, which ultimately can lead to significant movements.



As practice shows, the head of the Federal Reserve - a cautious man who seeks to avoid overly specific language, especially if you need to say one thing and facts and figures insist on the return. In order to predict the position of Yellen's see what has changed since the publication of the latest projections from the Federal Reserve on 15 June.


So, after a meeting of the Federal Reserve forecasts corrected downwards. GDP for the year is expected to reach 2%, the unemployment rate - 4.7%, inflation 1.4% and the root of inflation - 1.7%. This median, range of opinions has traditionally been quite broad.



What is now? Referring to a recent study by the Federal Reserve Bank of Philadelphia, which is updated quarterly so-called "review of professional forecasters", the oldest quarter review of macroeconomic forecasts in the United States. The research is quite fundamental and usually quite accurately reflect the real market expectations.


Thus, economic growth is expected in the 3rd quarter slightly higher than 3 months ago, but the annual forecast was reduced from 1.7% to 1.5%, which is also worse than in June and the Fed's forecast. The rate of unemployment has not changed and remained the same at 4.8%, also slightly worse than the forecast of the Federal Reserve.


But in this review, there is something else - the forecast in terms of employment growth, and, as can be seen in the table below, the new forecasts and 2016, and 2017. revised down:



As for inflation, the forecast is revised upward - to 2016. expected 1.6% and the root meaning - 2.2%, which is higher than the Fed and the June forecast. However, inflation latest news disappointing, in July recorded zero growth in retail sales and slowing growth in consumer prices and recent housing market data is ambiguous - the steady growth of the primary market with the simultaneous slowdown in the secondary signals that dominated investors (investment companies among the buyers, housing fund and so forth.), rather than the citizens, that is a sign of a bubble, not the growth in consumer demand.


Thus, the positive trend is projected to only one key indicator - inflation, and even then with reservations with regard to GDP growth and employment, from the Philadelphia Fed forecast revised to the downside, which means that at the meeting on 21 September are unlikely to appear grounds for a rate hike.


Thus, we can assume - at Yellen will not be obvious reasons for hawkish notes of, and therefore expect a strong strengthening of the dollar for the week is not necessary.


As regards market expectations for such an important criterion as the appetite for risk, the situation is as follows.Since just three of the central bank (the ECB and the Bank of England and Bank of Japan) are the asset repurchase program, the market generally sees these actions favorably, and thus, the demand for risky assets should be maintained. Stop the demand for risk and cause the purchase of protective assets can the Fed, if you dare raise, so if the market comes to the conclusion that the probability of this is low, such as the currency AUD and NZD immediately resume growth.


Risk sentiment currently prevails. Panic peaked on June 28 immediately after the referendum results were announced, and that row is already two months the market is gradually shifting towards profitable assets, ie, the first shock of Brexit recoup and disaster happened.



Thus, the fan for the week scenario looks pretty clear. The most likely is that neither Janet Yellen nor anyone else from the leadership of the Fed not announce bold plans to raise and cost general formulations in the spirit of "observe the criteria of economic recovery." Dollar lost momentum as a result of the growth, ariskovye assets, on the other hand, growth will resume, including the price of raw materials.


At the same time the players will be ready for the unexpected. This evidence - risk index decline for the fourth consecutive day, a sign of liquidation of long positions on a number of assets. Once again, the demand for bonds, yields on which are close to annual lows, stock indices in most countries are traded within fairly narrow ranges.


Attempts to strengthen the dollar is likely to be used to re-enter the market with a more comfortable level.Fundamental reasons for the strengthening of the US dollar a little bit, and by the end of the week the market is likely aware of this quite clearly.



A source



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