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Hawk or Dove to replace Janet? Print
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Is Janet Yellen a Hawk or a Dove?

We never really found out what she truly belived. She was both at times and while she was a Hawk telling us she was "minded to tighten rates", Donald Trump was a Dove, saying he wanted a weak dollar so interest rates would have to remain low.

 

Three days ago it was said that Trump favoured John Taylor for the new Fed chair. Another accademic of course, a theory man. Taylor is een as a Hawk, stronger dollar. He would likely hit the interest rate button as inflation ticks up.

His claim to fame is the Taylor Rule. All academics need a widely talked abot theory to impress other academics, and their students of coure.

The rule states that for evry 1% increase in inflation, the nominal (fed funds) interest rate must also rise by 1%.

And how did the $DXY react to the news, suprise suprise, it ticked up for a few hours helping it's uptrend along!

 

From the blog

Next Wednesday, up they go again...

The consensus is the Federal Reserve, at it's June FOMC meeting Wednesday 13th, will confirm the next US interest rate increase, from 1.75 to 2%:

The consensus, 'dot' plot and forward guidance is as plain as day. But, today, the bond market just had a hissy fit...

The standard 30 year US T Bond has been tumbling down this year. Interest rates do the opposite of course, moving on up as bonds slide. But just look at the chart. The chart bottomed on May 18th, rallied then tumbled again, until today, June 7th.

The 4 hour chart shows a major key revesal day, lower early in the day then higher than yesterday. Key reversals (or the candle version, Bullish Engulfing) are one of the strongest one day signals in the market.

What does this mean?

Maybe nothing more than traders liquidating their previous short position profits, just in case something unexpected comes out of the Fed minutes.

Or - the market just got the idea the Fed will change it's mind and delay the increase. The dollar will tank and stock markets will soar even higher. Stranger things have happened, just when everyone least expect it.

 

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