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Risk sentiment in ‘wait-and-see’ ahead of Jackson Hole – Danske Bank

FXStreet (Edinburgh) - The risk-on trade remains dormant at the end of the trading week, ahead of the events from the Jackson Hole Symposium, commented Flemming Nielsen, Senior Analyst at Danske Bank.

Key Quotes

“Risk sentiment overall remains positive but the market is gradually going to wait-and-see mode ahead of Fed Chairwoman Janet Yellen’s speech this afternoon”.

“Yesterday’s macroeconomic data were mixed. In the US data were better than expected across the board and the housing data particularly continued to suggest that the recovery in the euro area and China remains fragile”.

In the US S&P 500 closed at a new record high yesterday and Asian stock markets are mostly higher this morning, taking their lead from the US. In the FX market the USD is taking a breather after the recent sharp appreciation and the major FX crosses have been largely range trading overnight”.

“10-year US bonds yields have also declined slightly since market close in Europe yesterday, as the market has turned its attention from the slightly hawkish Fed minutes to Yellen’s speech later today”.

“In connection with the official opening of the Jackson Hole central bank conference yesterday, some of Fed’s hawks had the opportunity to express their views”.

“Kansas City Fed President Esther George, the conference host, in her opening remarks said broad-based employment gains suggest that the US economy is strong enough to withstand higher interest rates”.

“Philadelphia Fed President Charles Plosser, who dissented at the last Fed meeting, said that very easy monetary policy is increasingly risky. Plosser also warned against making wage development the centrepiece of monetary policy, as its relationship with inflation is not strong”.

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