Markets high on hawkish Humphrey-Hawkins testimony - ANZ

Analysts at ANZ explained that financial markets responded to a more hawkish-than-expected Humphrey-Hawkins testimony from Fed Chair Yellen.

Key Quotes:

"The economy is operating well, inflation is normalising towards the target and the labour market is continuing to tighten. That’s the FOMC’s assessment before taking into account future fiscal stimulus and regulatory changes that could further support growth.

The USD rallied and bond yields moved higher as expectations crept up that March (13-14) or May (2-3) could be live meetings for the FOMC to tighten. The yield on the 10-year note rose to 2.48% but the sell-off in bonds was restrained by the fact that Yellen clarified that the FOMC does not intend to use its balance sheet as an active tool for managing monetary policy."

"Unwinding the balance sheet is not on the cards just yet though it is expected to shrink down the track. Equities were little changed, with the S&P 500 up 0.1% at the time of writing. The DAX was unchanged, the CAC 40 was up 0.2% and the FTSE 100 was off 0.1%. Oil was firmer, with WTI up 0.5% at $53.2/bbl. Gold was unchanged at $1224/oz."