As Fed nears rate hikes, policymakers plan for ‘brave new world’

Following Yellen’s speech, prices for fed funds futures implied investors see roughly a 60 per cent chance of a December hike, up from just above 50 per cent on Thursday. Friday’s data on the second estimate of USA gross domestic product was put on the back burner following Yellen’s statement.

For now, the USA presidential election is not a concern for markets, though comments from Democrat Hillary Clinton about Mylan’s pricing of EpiPen hit that stock hard and sent the S&P health-care sector lower. On a daily chart, the level is seen providing resistance in April, and support in late May.

The S&P 500 rose after Fed Chair Janet Yellen said the case for raising rates had strengthened but did not indicate when the Fed would act. Yellen pointed to improvements in the US labor market and expectations for moderate economic growth, reinforcing the view that such a move could come later this year.

The dollar jumped against the yen and euro on Yellen’s remarks before turning lower.

The point was made by Janet Yellen, the Federal Reserve chair, in the speech that opened the Kansas City Fed’s annual symposium – a gathering of the central banking elite in Grand Teton National Park.

Cleveland Fed president Loretta Mester and Boston Fed president Eric Rosengren are due to soeak this week and are expected to add to the comments from Ms Yellen and Ms Fischer on Friday.

Apart form this, sectors like Oil & Gas may also see a correction as a strong dollar will increase the price of imported crude oil. His comments turned stocks lower and the U.S. Dollar higher.

The greenback climbed 1.1 percent to US$1.1198 per euro and strengthened 1.6 percent to ￥101.84.

AUD/USD is supported around 0.7550 levels and now trading at 0.7561 levels.

But there is another reason why Yellen’s comments have proved to be so hard to fathom: she now has to defend the Fed against increasingly virulent attacks.

The Gold Traders Association announced the buying price at 21,650 baht and the selling price at 21,750 baht per baht-weight for bullion.

The broad-based major European markets closed higher in Friday’s trading session, as rising mining stocks and automakers helped push the indices into positive territory.

If the United States hikes its interest rates in September, as is now expected, the emerging markets, including India, are likely to see atleast one sell-off in the coming months.

The Dow Jones industrial average fell 75.4 points, or 0.41 per cent, to 18,373.01, the S&P 500 lost 6.11 points, or 0.28 per cent, to 2,166.36 and the Nasdaq Composite dropped 11.83 points, or 0.23 per cent, to 5,200.38.

The yield on the 10-year Treasury note fell to 1.56 percent.

Yields initially rose to 1.60 percent on Yellen’s more hawkish tone, before moving in the opposite direction and dropping as low as 1.53 percent.

The emerging markets may feel some pressure because the global monetary liquidity will be reduced by the U.S. increasing its interest rates. It was on track to finish the week down 1.5 percent after two straight weeks higher.

The dollar rallied quickly off Yellen comments that were perceived as hawkish, said Minh Trang, senior FX trader at Silicon Valley Bank in Santa Clara, California. Crude rose 2.4 percent earlier while the dollar slipped, boosting the appeal of commodities as an investment.

Other markets:Oil futures (http://www.marketwatch.com/story/oil-prices-retreat-ahead-of-yellens-speech-2016-08-26) settled up 0.7% at $47.64 a barrel, but suffered their first weekly loss in a month (http://www.marketwatch.com/story/ oil-prices-retreat-ahead-of-yellens-speech-2016-08-26).