Citi On Yellen’s Speech: "What She Did Not Say Is Dovish"
By Tyler Durden
Yellen is still speaking in Philadelphia, but the attempts to set narrative and the market’s own “reaction function” to what the Fed is saying are already taking place, case in point, Citi’s Steven Englander who moments ago wrote that “Yellen expresses optimism throughout the speech but she doesn’t repeat her guidance from less than two weeks ago that a rate hike would be forthcoming “in coming months.”
Englander says that this on net is slightly dovish. “There is no timetable and the pluses are very vague. Unless the sky is falling in there is no way that she can express pessimism — would be self-defeating, so you take it as a given that she will sound optimistic on hitting targets in long-term. The vagueness on the timing of hikes is what is striking.”
As Citi’s Aerin Williams notes, “the market has been quite jumpy on Yellen speech. EURUSD made a quick look below 1.1330 as initial headlines read hawkish to the market but has since recovered to 1.1360/70. In G10, its been one of the most volatile.”
USDJPY has been less volatile – seeing a move towards 107.60 and now trading 107.17.
The cooldown is likely appropriate if one takes the guidance of CitiFX Head Strategist Steven Englander. What Yellen did not say in this speech can be taken dovish, in his opinion.
We expect that stocks will promptly regain their recent highs, because while the recently hawkish Fed was clearly bullish for stocks, a dovish Fed – as Citi now defines it – is even more bullish for stocks.
Source: Citi On Yellen’s Speech: "What She Did Not Say Is Dovish"
