Janet Yellen took to the hill today to testify on the state of the U.S. economy. Given the President Elect’s rhetoric about the current Chair of the Fed, the market was looking for hints about her future. What we did find out is that she will stay on her post for the entirety of her term, meaning she will not be resigning in 2017. Trump has the ability not to confirm her after her term has ended in January 2018.  This will be a critical move for markets as volatility at the Fed, the markets best friend, will have a significant impact on the global economy and markets.

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From an economic perspective, Yellen’s testimony was largely in line with what the market had expected. Yellen reiterated that the committees stance, which they affirmed in November,  are still on track for a rate hike this year. Yellen said the economy has continued to improve since the November meeting and that a rate hike will be coming “relatively soon.”

However not all is well as the unintended consequences of Fed action continue to weigh on markets. The Global wrecking ball that is the U.S. Dollar, has continued its ascent today as the December hike now looks like a formality.  Emerging markets, developed markets that need Dollar funding and U.S. exporters, have all taken notice.

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The Bank of Japan wasted no time signaling their intent of maintaining “yield curve control.”  While the world’s bond yields have risen dramatically over the past few months, Japanese yields have barely moved. However, at the beginning of this week, the BOJ Chairman’s first test arrived as the 10 year bonds went over the 0% cap rate. 

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With the BOJ signaling a harder cap than the market expected, we expect this to have significant repercussions for the rest of the worlds bond market.

Click here to get our latest on the Bank of Japan and what it means for bond and equity markets.