Currency Update for Steel Trading Nations

The Federal Reserve Open Market Committee met on Friday, an event closely watched by currency traders around the world as they try to anticipate the Fed’s future interest rate activity. AllianceBernstein (AB) had this to say on Saturday. While Yellen’s main focus in Wyoming was on the tools needed to ensure a resilient monetary policy framework, she also provided a strong hint of September action: “…in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.” That’s a very direct statement – unusually so for the Fed leader. And it’s very different from her tone after the June Fed meeting, when she was still looking for assurances from the labor market that the economy’s momentum hadn’t fallen off. Since those remarks, two payroll reports have been released, with both showing strong initial job gains (292,000 in June and 255,000 in July).

We included this July 12th comment from Economy.com in our last update on July 21st and think it is worth repeating here: “Investors from all over the world buy Treasury bonds, and when deciding whether to invest they compare the risk-adjusted returns with those on other global assets. With yields on most European and Japanese bonds now firmly negative, given the aggressive bond buying by the European Central Bank, the Bank of Japan, and perhaps soon the Bank of England, US Treasuries appear very attractive. And in times of global stress, like now, they appear especially enticing, as they are far and away the safest investment in the world.”