AUD/USD: what will Janet Yellen say?

AUD/USD: what will Janet Yellen say?

24 August 2016, 12:45
PCM-Brokers
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TRADING RECOMMENDATIONS

 The Australian economy has recently shown signs of slowing growth. For example, the construction of engineering structures has continued to decline. In the 2nd quarter the reduction of civil engineering structures was the biggest in almost 16 years.

On the agency Moody's last week downgraded forecasts Australia's four largest banks ratings to negative from stable, justifying this decision sluggish growth in profits due to slow wage growth, low interest rates, strong competition and growing household debt.

Earlier in August, the RBA issued a forecast that inflation will remain outside the target range of 2% -3% to December 2018. Low inflation will be a major factor in the decision on interest rates in Australia. Australia's central bank lowered the rate to a new record low of 1.5% earlier this month, and many economists expect further rate cuts. This will be a negative factor for the Australian dollar in the medium term.

The attention of traders today and it seems that until the end of the week, will focus on planned for Friday speech Fed Chairman Janet Yellen at the annual economic forum in Jackson Hole.

Yesterday, with the opening of the trading week, there was a slight weakening of the US dollar. However, yesterday's positive data on the housing market in the United States, published in the 14:00 (GMT), allowed the US dollar to recover some of the lost positions on the eve of the foreign exchange market.

Before the performance of the WSJ Yellen dollar index, which reflects the value of the US dollar against a basket of 16 currencies, rose 0.07% to 85.76.

Participants expect Yellen guidelines regarding the Fed's next increase in interest rates. However, most likely, D.Yellen pronounces common words about the current situation, the favorable situation on the labor market and stable inflation in the US. Hardly Yellen will indicate a rate hike in September, and are likely to declare again that the rise in US interest rates this year is still possible. Against the background of weak US data on productivity and GDP growth in the 2nd quarter, the Federal Reserve is unlikely to be decided on a rate hike in the coming months, despite the active verbal intervention by the Fed the possibility of an early rate hike.

Neutral tone D.Yellen speech can be understood by investors as a signal of the inclination to a milder policy, which would put downward pressure on the US dollar. If D.Yellen even gives a hint of the possibility of a rate hike in September, the US dollar strengthened sharply on the currency market.

 

 

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