“Waiting too long to tighten would be unwise; more policy adjustments will likely be needed if the economy remains on track.” A number of Fed officials chimed in Tuesday and Wednesday to reinforce Ms. Yellen’s message that they expect to raise short-term interest rates in coming months, perhaps as soon as March.
With the Fed set to make further rate hikes and the ECB continuing its love for Quantitative Easing, we examine the effect these contradictory monetary policies are likely to have on organizations reliant on the near-term Dollar/Euro spreads.
Stateside, the markets attention this week turns to Fed Chair Yellen semi-annual testimony in Congress (Feb 14th and 15th 10:00 EST). Investors will be looking for more clues on how probable are the expectations of a March rate hike.
U.S. President Donald Trump pledged on Friday to announce a “phenomenal” tax reform. The first three weeks of the Trump administration did not align with the pro-growth agenda, favoring instead an “America first” protectionism which have weakened the USD. Fed Chair Janet Yellen will testify before the Senate Banking Committee on Tuesday; her take on the U.S. economy will be followed closely by investors.
With currency manipulation trending strongly on Trump’s twitter rants, tomorrow’s high profile Abe-Trump summit will be closely scrutinized. Japanese Prime Minister Abe has signaled he is prepared to discuss the currency issues at G20 and will try and convince POTUS to do the same.