The Federal Reserve (Fed) minutes from the April meeting, released last week, surprised the market with the Fed's insinuation that a June increase in interest rates may be warranted based on economic data. The market had effectively reduced the odds for a June tightening to almost zero before the minutes were released.
The Fed's more hawkish tone has made two upcoming speeches from Fed President Janet Yellen very important. Yellen is scheduled to speak on Friday, May 27, and Monday, June 6, ahead of the Fed's June meeting. If she reiterates the hawkish tone, then the market will price in the potential for a Fed increase. This would most likely lead to an increase in yields for short-term Treasury bonds, a strengthening of the U.S. dollar and weakness in commodities/emerging markets.
I expect the market to trade in a narrow range until the speeches, as central banks continue to be the primary influence on market pricing.
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