Banks looking for a ho-hum speech

We're seeing more chatter about a disappointing Jackson Hole. The things is, the market has grown awfully complacent in the past two months. Yellen's speech is certainly the biggest thing on the calendar but market watchers have already concluded that she won't say much to ramp up volatility.

Here's Kit Juckes at SocGen:

If markets are waiting for Jackson Hole the good news is that, unlike Godot, Janet Yellen really will turn up. I doubt she's going to say anything that radically alters sentiment, but that's another story, and one for tomorrow more than today. If there's a trend today, I suspect it will just be more yield-searching.

The market's default position is to wait for Ms Yellen's speech and then conclude that the Fed will still only be hiking rates so slowly that we'll hardly notice when they eventually do. That's not a recipe for either volatility or much in the way of dollar strength. Even so, having fallen 8% on a trade-weighted basis since real Treasury yields started falling in January, the dollar is still 25% higher in value than it was four years ago as rally was just getting going. Those real yields matter. 10yr TIIPS yields fell by 90bp to -0.1%, but have edged back up a bit and the context for the Fed's rethink on monetary policy is that 10-year real yields are barely above zero. I'd rather be short TIIPS than long them at these yields and if that's what's driving the dollar then....

I continue to wait in vain for USD/JPY to spike lower (so that I can buy it). That's just frustrating.

It's a similar story over at BTMU, where they say they have a neutral bias on EUR/USD in a range of 1.1150 to 1.1450.

"The performance of the US dollar in the week ahead will be dictated by the market's interpretation of Fed Chair Yellen's speech at Jackson Hole.

We believe that Fed Chair Yellen is unlikely to explicitly signal that the Fed plans to resume rate hikes in September although it will be left open as a "live" meeting dependent on the incoming economic data. It could prompt some initial relief weighing on the US dollar.

However, the negative impact on the US dollar should prove limited with the market already discounting hardly any further tightening in the coming years. In contrast, there would be a much larger market adjustment if Fed Chair Yellen encouraged the market to price in a higher likelihood of a September rate hike which would provide more support for the US dollar in the near-term.

The recent direction of EUR/USD has been mainly driven by broad-based US dollar weakness although the easing of Brexit fears is also helping to offer support for the euro. The euro-zone economy has been little impacted so far by the Brexit vote reducing the need for the ECB to announce more easing as soon as in September."

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