Yellen, Trump Tax Plan Push Up Euro Zone Bond Yields

Posted September 28, 2017

USA gold futures for December delivery settled down $13.90, or 1.07 percent, at $1,287.80 per ounce.

Because changes in interest rates influence economic activity and inflation with a substantial lag, the Federal Open Market Committee (FOMC) sets monetary policy with an eye to its effects on the outlook for the economy.

Yellen's speech comes a day after a host of Fed officials provided differing views on inflation, with one central banker saying inflation weakness is fading, while another suggesting he's nervous it won't.

The US dollar has built added to September's modest gains with another 1.3% rally this week, breaking the downtrend channel in place since the April highs.

Rabobank strategists say that if the tax reforms raises the chances of the US sustaining a 3 percent growth rate, then it will be a significant boost for the dollar which has suffered this year and is poised for its biggest annual drop since 2004. "So we do see lower [prices] predicated exclusively due to the monetary tightening by the Fed in the U.S".

The biggest focus for the market for Wednesday is the announcement of a tax plan by the United States administration and Republicans in Congress.

Investors are also watching for US President Donald Trump's speech later on Wednesday, on tax reform, amid hopes that promised tax cuts may be in the offing.

But Yellen & Co see these kinds of influences as "transitory" and do not allow them to crowd the discussion on interest rates.

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Gold prices were largely unchanged on Wednesday after falling over 1% in the previous session on hawkish comments from US Federal Reserve chair Janet Yellen, while lingering North Korea worries supported prices. US prices had rallied on Monday, with the gains spurred in part by a threat from Turkey's president to cut off oil exports from a Kurdish region of Iraq.

The quite hawkish remarks sent the dollar and USA bonds higher as investors grew confident of another rate hike in December. But even with uncertainty about the possible reasons for the low rate of inflation - from misjudging the strength of the labor market to the impact of foreign competition on the global supply chain - Yellen said the Fed "should be wary of moving too gradually".

U.S. Treasury yields extended their rise in European trade, with 10-year yields hitting an eight-week high of 2.30 percent US10YT=RR .

Weekly data on US petroleum supplies will be released by Energy Information Administration late Tuesday and arly Wednesday.

S&P 500 e-minis were down 2.5 points, or 0.1 percent, with 127,187 contracts traded.

-The MSCI Emerging Market index sank 0.8 percent to the lowest in more than a month. The euro was at $1.1756-1757, down from $1.1812-1813, and at ¥132.48-49, up from ¥132.01-02. The Nasdaq composite gained 9.57 points, or 0.2 percent, to 6,380.16.

Compared to the Japanese Yen, the dollar climbed 0.4 percent to 112.19 yen.

OIL: Benchmark U.S. crude rose 24 cents to $52.12 per barrel on New York Mercantile Exchange.