Just weeks ago, the Fed resurfaced the idea of another interest rate hike. Even after hearing that directly from the FOMC, many market participants believe it will likely not happen this summer or prior to the U.S. presidential elections, which in and of itself adds to the potential to shake up the markets.
Janet Yellen and her colleagues at the Federal Reserve may welcome the additional time to pour over the latest complex interplay of data on employment and payroll data, housing starts, consumer spending, inflation figures, relative dollar strength plus key global indicators and events such as currency rates, oil prices, and a potential "Brexit" before she provides the mood music on the timing of the next hike.
While the Fed has been strongly adverse to risking the recovery underway with a slow and steady approach, market sentiment has danced to a slightly different tune on timing and there is every possibility of a bout of global market volatility resulting from underestimating the Fed’s purposeful determination to raise rates. Monitoring key data pointsover the weeks and months ahead will be as important as ever including market sentiment indicated through trading data on the U.S. Treasury market through platforms such as eSpeed.