Janet Yellen speaks at the Economic Club today (12:20 PM ET) in an event that many hope will provide clarity on whether the market’s original interpretation of the FOMC dots/balance of risks/forecasts and Q&A in all its entirety, was as dovish as originally assumed; or, whether the subsequent more hawkish comments from various Fed officials was more in keeping with what the FOMC was trying to convey. Just to complicate the message the most recent data (corporate profits, core PCE deflator and revisions to PCE) work in favor of a more dovish conclusion. While Yellen has already said the April FOMC is ‘live’, and she will probably reaffirm this, we do not expect her to emphasize or belabor the point.
If we look at the impact of past Yellen macro speeches since she became Fed Chairperson, we find an underwhelming market impact.
After the Yellen speech we expect the market to remain very reluctant to price in an April hike. This should still work with the assumption of a long enough period without Fed tightening to foster some moderate follow through to the risk positive environment.The initial reaction will be restrained in part because participants will wish to avoid getting whipsawed by key data at the end of the week.
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As for the USD, the median currency impact has been minimal for Yellen’s past speeches and testimonies. There is nothing here to suggest USD bulls should be holding their breath in the hope of immediate significant USD support.