Against a backdrop of firmer equity markets, Yellen still sees too much slack in the US economy to tinker with rates - ASX futures 24 points higher

The big news last night was the not so big news that came from Federal Reserve Chairwoman Janet Yellen, who testified before the Senate Banking Committee last night. Why not so big news? The market has been waiting for a solid indication of when the Fed might move away (upward) from its zero rate interest policy. But last night Yellen highlighted the that "too many Americans remain unemployed or underemployed, wage growth is still sluggish and inflation remains well below our longer-run objective." So she's certainly giving the market plenty of reasons to believe that earlier hawkish comments about rate hikes being drawn from simple equations based on unemployment and growth are no longer valid.

Regardless of how it's being reported, the market is going to place its bets on a rate hike further out than it did previously and--as we can see in today's first chart--the US dollar strength remains on hold. US consumer confidence came in lower last night, contracting with a print of 96.4 versus 99.5 expected, and this would also have helped push out bets of a rate hike. The market is presently pricing in a 50%+ probability of a US rate hike in October 2015. This will likely have the added effect of making the Reserve Bank of Australia more at ease about cutting its rate, but there are a couple of caveats to that - one is the housing market.

The Australian dollar (looking at today's second 10-minute AUDUSD chart) responded very positively to this news, chiefly due a touch of US dollar weakness combined with the fact that expected emerging differences between Australian and US interest rates are now more mild than they were before Yellen's testimony. The AUDUSD pair had softened into the European open yesterday only to pop back up from mid US$0.7740 lows to be trading at US$0.7830 as I write. While this time last week the Australian cash rate market was pricing in a 71% chance of a March RBA rate cut to 2.00% (next Tuesday), this has dropped now to 47% - a score showing it is no longer a probability. So we have limited guidance of what might happen with Australian cash rates next week - Sydney's 86% auction clearing rate last weekend will certainly tempt the RBA to exercise some caution!

ASX 300 companies reporting earnings today:
  • AGI    Ainsworth Game Technology
  • AIR    Air New Zealand
  • ASL    Ausdrill
  • AUB     Austbrokers
  • AWE    AWE
  • BCI    BC Iron
  • CHC    Charter Hall Group
  • CTD    Corporate Travel Management
  • CVW    ClearView Wealth
  • CWP    Cedar Woods Properties
  • ENE    Energy Developments
  • HGG    Henderson Group
  • IRE    IRESS
  • MET    MetlifeCare
  • MMS    McMillan Shakespeare
  • MVF    Monash IVF Group
  • PCT    Precinct Properties New Zealand
  • PGH    Pact Group Holdings
  • RHC    Ramsay Health Care
  • SAR    Saracen Mineral Holdings
  • SIQ    Smartgroup Corp.
  • SVW    Seven Group Holdings
  • SXY    Senex Energy
  • WFD    Westfield Corporation
  • WOR    WorleyParsons

Today‚Äôs charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Upcoming economic announcements: RBNZ Governor Wheeler speaks at Finance Select Committee at 10:40, HSBC Chinese PMI at 12:45, Yellen testifies to financial services committee at 2am, new US home sales at 2am, all Sydney time.


comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice, securities and derivatives dealing services and accounting administration services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.