Yellen Will Walk Tightrope in Tomorrow’s Scheduled Speech

Of course, there are many in the trading community that wish the side-talkers in the Fed, especially the ones who are FOMC non-voters, would walk the plank because they are pushing and pulling the financial world.

Tomorrow’s speech is the ideal opportunity for Chairwoman Yellen to put the world straight as to what she, if not the core of the FOMC, is thinking.

There have been so many different messages from the FOMC recently, I think people are confused," said Ian Winer, director of equity trading at Wedbush Securities.

Adding to the confusion today was a welter of data, as well as a one-third of a percentage point drop in crude oil prices.
A reading on housing showed that pending home sales rose 3.5% in February. The index from the NAR (National Association of Realtors) rose to 109.1 from a downwardly revised 105.4 in January. That’s the highest level in seven months.

Earlier, the PCE index was released, which is the Federal Reserve's preferred inflation barometer. It rose just 1% in the past 12 months ended in February, down from 1.2% in the prior month.

The Fed wants to see inflation rise closer to 2% before it raises interest rates again. So, math wizards that we are, we can tell you that the rate of inflation needs to double before a red flag warning goes into effect.

One more time: except for fear or ideological “reasoning,” what other reason then would a member of the FOMC have for raising interest rates just now?

A weaker U.S. dollar against the euro helped gold rise about $3.10 today, rescuing it from what otherwise would have been a loss (via regular trading). That doesn’t tell us much fundamentally about gold. Silver is largely unchanged and platinum and palladium are down.

We certainly are not experience a risk-off day across the broad spectrum of markets. Aside from gold’s lethargy, the yen is down against the dollar. The yen, as many people know, is considered a haven currency. The greenback’s losses to the British pound today are unique. The pound was oversold and talk about Brexit has quieted as the U.K. gets through the Easter holiday.

Additionally, U.S. 10-year bond yields, after spiking to 1.94% fell below 1.9 on the day. That reflects less interest in haven-play bond purchases by institutions.

Yet we really didn’t experience a risk-on day. Trading was thin, representing a quiet day after Easter that keeps senior decision-makers home, extending their weekend.

Trading in New York in oil was on a normal schedule but oil in Europe was trading on a reduced scale, with only about 15% of the normal contracts moving through for this Monday.

The weaker oil kept a lid on any little pools of enthusiasm that might have been bubbling under the predictable, post-holiday flatness of sentiment.

Within a tenth of a percentage point the New York indexes are up or down barely. Call them unchanged. And, European equities were down more heavily than New York, all three major bourse indexes there off between 1.5% and 2.15%.

Investors are waiting. And waiting. For more inflation? Certainly. For Janet Yellen to play sheriff and clean up the unruly Tombstone Territory that some of her colleagues on the Fed dwell in? Absolutely. For something other than the 1.5% to 1.7% growth the U.S. is seeing? Most assuredly.

But, (and this is our opinion), until the U.S. Congress throws itself into big, grand-scale projects of some sort, the world economy will remain stuck in second gear. No other government can affect change the way the American government can, once it puts its collective shoulder to the wheel.

Wishing you as always, good trading,