Janet Yellen, the head of the U.S Federal Reserve made sure her words were not minced or misunderstood in her press conference after the 2 day FOMC meeting came to an end. Her Lower Rates for Longer message was there for all to see and hear. During her press conference she had some visual stimuli in the way of charts with some lovely dots, indicating that interest rates would start to rise much faster than previously anticipated.
These beautiful “much thought out creative charts’’ were roundly ignored by everyone as it was what came out of her mouth that really mattered. She played down rising inflation as not really a problem , potential bubbles forming in equity and other risk assets, and a labour market that is showing real signs of recovery to say that the ‘’Punchbowl’’ in the way of monetary stimulus would be here to stay until the U.S Federal Politburo..Oops sorry I mean Reserve were able to attain their goals.
Yellen reiterated that lower Interest Rates were here to stay for LONG after the buying of MBS (mortgage back securities) came to an end. The market cheered these soothing words for a while with the Dow and S&P putting on small gains.
We wrote recently about Gold and the potential for money to flow into as a result of both the Iraq ISIS unrest and monetary policy by the Central banks. Well, Madame Yellen barely got the words out last night and the yellow metal exploded. In fact it rallied nearly $50.00 an ounce, one of the biggest one day rallies in years. It pretty much puts the nail in the U.S. Dollar’s coffin for the short term, unless investors decide that they want another safe haven to flock to in times of this geopolitical unrest.
The Australian Dollar now looks on track to break out of this 2 month range it has been trading in with its counterpart the U.S Dollar, with resistance around the 0.9450 area, potentially making a push for the 0.9750 area that was flagged a month or two back as the medium term target for this rise we have seen since January of this