Yellen Speech Eyed as Fed Tone Turns More Hawkish

European investors return on Tuesday following the long bank holiday weekend and while the trading week may be a little shorter it’s likely to be quite eventful, with particular interest being on the Federal Reserve ahead of its April meeting.

While the markets are currently far from convinced that the Fed will raise interest rates again at its April meeting – only 12% chance of a hike priced in based on Fed Funds futures – this could change dramatically this week.

Fed Rate Prob

Source – CME Group FedWatch Tool

Fed Chair Janet Yellen is due to speak today on the Economic Outlook and Monetary Policy at the Economic Club of New York luncheon and her comments are likely to be followed very closely, especially given the more hawkish tone we’ve had from a number of other policy makers over the last week.

There’s also a number of key economic releases due this week which could force investors to reconsider their apparent insistence that a hike is not imminent. Monday’s core personal consumption expenditure price index – the Fed’s preferred inflation measure – did little to change people’s belief’s, despite remaining at 1.7%, only slightly below the Fed’s 2% target. There are a number of data releases this week which investors are likely to monitor still, none more so than Friday’s jobs report which rarely fails to get a reaction out of investors.

While European equity markets are currently seen opening around half a percentage point higher, we could well see traders approach this week with some caution given what lies ahead and the impact it could have on next month’s Fed meeting. The Asian session overnight was relatively mixed which didn’t offer much direction for the coming session and Europe is looking relatively quiet from a data perspective today.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.