Both of the most likely central bank candidates for commencing monetary policy normalisation have this week been vocal about the increased chances of them raising interest rates soon. With the bailout agreement on Greece earlier in the week this removed one of the major risks to global financial markets giving the Governor of the Bank and Federal Reserve’s Chairwoman good reason to take a more hawkish approach on rates. Now that the Greek parliament has voted in favour of the terms of the bailout this has provided instance justification for their positions. Mark Carney and Janet Yellen have been jostling for many months to try and provide as much guidance as possible to the market on their outlook for rates, often having to back track and adjust their approach to policy making, but this time they are sending a clear message to investors. Risk assets have recovered well following the Greek bailout agreement, but many indices are still well below their 2015 highs. The S&P 500 tested its 200 day moving average only days ago and has some way to go to convince buyers that the bull run isn’t over, so the key levels of 2,135 to the upside and 2,060 to the downside will be watched closely.
Today’s ECB meeting is an important risk event and then Yellen completes her two day testimony to US Congress so we’ll see if the mild dollar strength from yesterday can continue.