Market await Yellen's speech

Market movers today

More Fed talk on tap today. Vice-chairman Stanley Fischer will speak in Frankfurt around noon on financial stability and tonight Fed chairman Janet Yellen is delivering a speech at a conference in the central bank she used to represent in San Francisco. She is speaking at a conference with the theme ‘The New Normal for Monetary Policy’.
On the data front, French consumer confidence and the final reading for consumer confidence from University of Michigan are the only releases of interest among majors. They are not likely to move the markets, though. French consumer confidence has been on the rise over the past three months in a sign that even France is recovering.
Retail sales and Norwegian unemployment. For more on Scandi markets see page 2.

Selected market news

A disappointing batch of Japanese data overnight with notably inflation and retail sales surprising on the downside stole the attention in the Asian session. Japanese equities have sold off, illustrating the worries that Bank of Japan (BoJ) may not deliver more easing despite the worsening outlook for inflation. Nonetheless, USD/JPY has recovered after the dip yesterday. We expect the cross to head higher still but driven mainly by another round of USD strength, as it will in our view take a more sustained period of weakness in the Japanese economy for the BoJ board to expand its already very aggressive QE scheme.

Equity markets mixed in the rest of Asia. The oil price has come down a little after the Yemen-induced move higher yesterday to trade around the USD58/bbl mark. US Treasury yields were up some 2-10bp in a steepening of the curve.

A lot of central-bank communication for markets to digest yesterday. First, the Czech central bank while keeping its policy rate unchanged said that it was ready to shift higher the floor on EUR/CZK should deflationary risks rise further. Second, Bank of Canada governor Poloz said in a speech that the Bank of Canada is comfortable given the ‘insurance’ the central bank had taken out by its surprise January rate cut. Finally, two speeches from SNB board members last night in our view pointed to the likelihood of SNB preparing a move to induce a sustained weakening of the CHF. Both speeches focused on explaining the thinking behind the discontinuation of the EUR/CHF floor in mid January but in terms of future monetary policy stressed the need for a weaker CHF and that the SNB has a range of tools to induce this including intervention and negative interest rates. Importantly, in a Q&A session, board member Zurbrügg notably echoed comments from another board member, Thomas Moser, earlier this week that the SNB is looking at the IMF suggestion of buying foreign-currency assets.

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