Fed Chair Janet Yellen says that the case for a rate hike has strengthened in recent months. The Fed nears employment and inflation goals. However, she also says that fiscal policy could enhance economic stability, aka, the government should do more. In addition, she laments the Fed’s ability to see into the future. And of course, Yellen says that everything is data dependent.

While Yellen is more upbeat on the economy, there is no smoking gun for a rate hike in September. Any minor data disappointment either from the NFP, retail sales or a few other figures could serve as an excuse not to raise rates.

Currency reaction to Jackson Hole speech

• EUR/USD is falling from above 1.13 to 1.1240 before bouncing back to 1.1270.
• GBP/USD is around 1.3210, down from the highs.
• USD/JPY is at 100.60, above previous levels.
• USD/CAD is trading around 1.2880.
• AUD/USD is relatively stable at 0.7660.
• NZD/USD is at 0.7350, sliding from the new highs it broke to earlier.

The US dollar is stronger initially, but the gains do not persist.

EUR/USD falls on Yellen’s speech – chart

— more coming —

Fed Chair Janet Yellen is speaking at the annual Jackson Hole Symposium in Wyoming. She is accompanied in this event by other Fed officials and by BOJ Governor Kuroda. Yellen is usually dovish and prefers a “wait and see” approach over acting and raising rates too soon. Many expected a dovish speech and only a few saw a chance of a hawkish surprise, aka a heavy hint of a rate hike in the upcoming meeting.

The next meeting of the FOMC is scheduled for September 22nd. The event consists of fresh forecasts and a press conference. Following a few upbeat comments from several Fed officials, some expect the Fed to raise rates in this meeting. This is supported by data released this week, including a jump in new home sales as well as a bump up in durable goods orders.

On the other hand, not all data has been positive: retail sales badly disappointed and inflation is not going anywhere fast. In addition, the presidential elections are looming and the Fed will not want to be seen as intervening in the electoral process.

Here is a video preview of the highly anticipated Jackson Hole event: