ING shares its expectations of ads and impact on the Forex before the speech by Yellen at Jackson Hole.
«While we believe that the speech by Yellen at Jackson Hole on Friday will be more uncertain, the focus on financial stability could raise interesting questions of policy and of market.
In addition to the debate on inflation, the FOMC Minutes from July showed that two members have expressed two conflicting views on an additional major theme : the interpretation of the financial terms that are more flexible and what should be the appropriate policy accordingly.
While one member was of the view that this justified a monetary policy that is even less accommodating (the conventional view), the other considers that in the absence of inflation, there is no need a lot of rate hikes to tighten financial conditions (point of view is more avant-garde).
We rather agree with the latter, and this could also be the conclusion of Yellen in his speech this week, which should in theory, not cause a readjustment major expectations of Fed monetary policy.
If we get it wrong – and that Yellen noted that monetary tightening may be more aggressive – the us Dollar is expected to go up on the Forex and the risky assets (stocks) to fall. «