Is it just me or does the focus seem to be much more on ECB President Draghi than Federal Reserve Chair Yellen? If so, why is that?

Anyway ... NAB focus on Yellen

This via National Australia Bank:

  • Fed chair Janet Yellen's address to the Kansas Fed's Jackson Hole symposium on Friday. She is talking on financial stability. If she plays up the easing in financial conditions that has occurred since January, since when the Fed has raised rates twice, and highlights the risk this poses to financial stability, it could prompt something of a market reassessment, on the view that it is not just evidence of higher inflation that is going to be driving decisions on further Fed tightening.

NAB does not look ahead to Draghi's speech but certainly don't ignore the ECB, in a nutshell they have this to say:

  • The ECB is preparing to announce its asset purchase taper program that will start in early 2018 'in the fall'. While markets ponder over whether that means the 7 September or 26 October meeting (we side with the former), we don't think it matters much which meeting as far as FX and yield movements are concerned. The ECB's Minutes of its last (July) meeting show it is more aware of FX markets 'overshooting' and pushing the EUR higher

This via Commzerbank:

"The Governing Council will acknowledge these developments and within its mandate will use all the available instruments needed to ensure price stability over the medium term."

  • In his Jackson Hole speech on 22 August 2014, ECB President Mario Draghi used these words to pave the way for the asset purchase programme the ECB initiated five months later.

It might thus be appropriate for Draghi to use his Jackson Hole appearance three years later to announce a slow and cautious exit from ultra-expansionary monetary policy, referring to the improved economy.

  • At least some euro traders had expected this to happen and were disappointed after reports from ECB sources had dashed such expectations, calling them "wrong".
  • Draghi was quoted having told the other central bankers on the ECB Council that he would respect a decision to hold off on the discussion of future monetary policy only until the autumn.
  • But even this decision is having an influence on the euro - after all such action supports the notion of the ECB wishing to remain as flexible as possible. If the euro were to appreciate too much by autumn, this could thus certainly have an impact on the ECB's decision.
  • Even with no immediate impetus to be expected from Draghi himself (although in 2014, he only added the crucial sentences immediately before giving his speech), this by no means argues for a weaker euro.
  • Indeed, the US dollar is currently no match for the euro. The greenback is feeling the drag from ever-more obvious disagreements between the US government and companies, as well as the issue of whether the latest slower increase in inflation may prompt the Fed to postpone a rate hike. We fear that only by year-end rather than in the coming week will the Fed be able to convince the market that it will firmly adhere to its tightening course. And for now this argues against much lower EUR-USD levels.