Fed Domination Continues as Blackout Period Nears

European equity markets are expected to open a little lower on Friday, following the cue from the US and Asia overnight where markets ended in the red following a phenomenal run over the last month, particularly across the pond.

While the weekend is nearing and we may be seeing some profits being taken off the table, the week is far from over with four Fed officials – including the Chair and vice Chair – all speaking throughout the day prior to the blackout period. We’ll also get a scattering of services PMI data from across Europe and the US as the day goes on which should ensure the end of the week is anything but a dull affair.

Doves in the Hawks Nest

Investors have spent the last week in a frenzy trying to position themselves for a possible rate hike in March, having only a couple of weeks ago written one off almost altogether. We’ve now almost swung entirely the other way, with the probability above 75% from below 20% previously.

Source – CME Group FedWatch Tool

With Janet Yellen, Stanley Fischer, Charles Evans and Jerome Powell all making appearances today, there will be ample opportunity for officials to make any final tweaks to expectations before blackout period begins tomorrow, at which point we won’t hear from any Fed policy makers again until 15 March.

Precious Metals. We Meet Again Mr. Bond’s.

Given the intention was clearly to ensure the markets see this meeting as being live, I think the message today will be broadly consistent with what we’ve heard over the last week. The risk is that the Fed raises expectations too high for March and doesn’t deliver which will once again have people questioning its credibility. Whether markets fully buy into March could hang on the subtlest of hints today from Yellen, for example whether she talks about the prospect of a hike in March as opposed to upcoming meetings. The latter would give the Fed some leeway heading into the meeting.

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

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