All eyes on Yellen

All eyes on Yellen. Following last week’s FOMC minutes, which indicated that the June meeting was “live”, financial markets continue to price in the probability of a 25bp rate hike. Pricing has so far been orderly with steady gains in USD and US rates, while risky assets are generally holding value. However, despite the strong hawkish commentary by Fed members, we are skeptical that mixed economic data supports a summer rate hike. The AUD has come under renewed selling pressure as domestic demand has underperformed, commodities rally is stretched and China data remains weak. Uncertainty around the Brexit issue is the primary driver of GBP pricing, causing volatility to surge as we close in to June 23rd. The “remain” vote is beginning to gain ground on the “leave” vote, potentially lowering markets fears. In Japan, BoJ Kuroda stands committed to act with whatever tools are necessary (despite G7/US concern over competitive currency devaluation) to reach their inflation target.

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This article is a guest blog written by Peter Rosenstreich from Swissquote