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Don't Rock the Boat - Yellen

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“So I'd like to know where, you got the notion, said I'd like to know where, you got the notion to rock the boat, don't rock the boat baby, rock the boat, don't tip the boat over.”

As if Janet Yellen took a cue from the 1974 song by the Hues Corporation, in her speech Friday at the annual economic symposium in Jackson Hole, Wyoming, she decided not to rock the boat. Although she spoke out in defense of the regulations that were initiated during the Obama presidency, she did not address any future plans or timetables in regard to the Federal Reserve’s next rate hike.

The only boat she really rocked was her own. She sent a loud and clear message to this current administration as she defended the Dodd Frank legislation implemented after the 2008 crisis. In her speech, she acknowledged that it was the reforms that shored up the U.S financial system by making it mandatory that banks increase the capital on hand, as well as the alleviation of high-risk assets on their balance sheets.

Initial commentary about Janet Yellen’s speech has alluded to the fact that her comments were directed at the current administration, and that likely this would be the last keynote address from the current chairwoman, as her position with the Federal Reserve will come to a conclusion in February.

According to an article penned by Pedro Nicolaci da Costa, in Friday’s Business Insider, “In her keynote address at the high-profile conference in the Grand Teton mountains of Wyoming, Yellen was not holding back — in a way that potentially suggests she is not holding her breath for a reappointment from Donald Trump. Yellen's term as Fed chair expires in February, and Trump is widely expected to nominate Gary Cohn, ex-president of Goldman Sachs and head of the president's National Economic Council, to replace her.”

Paul Ashworth, an economist at Capital Economics, said in a research note, "Fed Chair Janet Yellen's passionate defense of the post-crisis tightening of financial regulation isn't going to go down particularly well at the White House. Donald Trump has made rolling back regulation the centerpiece of his presidency." 

With the looming potential for a government shutdown, if the powers at hand are unable to come to an agreement about our budget and raise the debt ceiling, there is the potential for further economic upheaval in the United States.

This, coupled with other upcoming events as well as the current political turmoil in Washington, has put defined pressure on the U.S. dollar, which has been extremely supportive of gold pricing. As Friday, gold futures are trading up 4 ½ dollars at $1296.50. The U.S. dollar continues its freefall losing over 8/10 of a percent in value vis-à-vis the U.S dollar index.

Although Janet Yellen said very little today in regard to the future plans of the Federal Reserve, the current economic climate is certainly rocking the boat in regards to U.S. dollar strength.

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Wishing you as always, good trading,

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