25 May 2015
Yellen reaffirms her view for a rate hike – RBS
FXStreet (Barcelona) - Greg Gibbs, FX Trading Strategist at RBS, shares the key points from Yellen’s speech and further comments on the probable impact on the Dollar from a rate hike this year.
Key Quotes
“The down move in the EUR was given a little more confirmation after the Yellen speech on Friday. She maintained the line that her outlook remains for rate rises at some stage this year. She said, “If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate”.”
“She reiterated the key touch points for the Fed. She said, “I will need to see continued improvement in labour market conditions, and I will need to be reasonably confident that inflation will move back to 2% over the medium term”.”
“Words intended to prevent a big rise in US yields and inoculate the market to an eventual hike, Yellen reaffirmed she will move cautiously. She said, “By proceeding cautiously, which I expect would mean that it will be several years before the federal funds rate would be back to its normal, longer-run level”.”
“A small US rate rise may not seem to be a good reason for a very big rise in the USD, but when compared to policies in the Eurozone and Japan, it can have a big impact. The expectation of a hike has already driven large moves in the USD since mid-2014. The USD may not rise to significant new highs if the hike is delivered, but it will probably remain in a meaning rising trend as it draws nearer.”
Key Quotes
“The down move in the EUR was given a little more confirmation after the Yellen speech on Friday. She maintained the line that her outlook remains for rate rises at some stage this year. She said, “If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate”.”
“She reiterated the key touch points for the Fed. She said, “I will need to see continued improvement in labour market conditions, and I will need to be reasonably confident that inflation will move back to 2% over the medium term”.”
“Words intended to prevent a big rise in US yields and inoculate the market to an eventual hike, Yellen reaffirmed she will move cautiously. She said, “By proceeding cautiously, which I expect would mean that it will be several years before the federal funds rate would be back to its normal, longer-run level”.”
“A small US rate rise may not seem to be a good reason for a very big rise in the USD, but when compared to policies in the Eurozone and Japan, it can have a big impact. The expectation of a hike has already driven large moves in the USD since mid-2014. The USD may not rise to significant new highs if the hike is delivered, but it will probably remain in a meaning rising trend as it draws nearer.”