(Aug 26 Bloomberg) Caution prevailed in financial markets before a speech by Federal Reserve Chair Janet Yellen, with the dollar paring a weekly advance, while European stocks and U.S. futures fluctuated.
The U.S. currency fell against most of its major peers as investors looked toward Yellen's address for clues on the timing of U.S. interest rate increases. Most European stocks fell, while S&P 500 contracts were little changed as the index headed for a weekly drop. Oil declined, poised for its first weekly retreat this month. The pound was on course for a second week of gains on optimism that the fallout from Britain's vote to leave the European Union may not be as severe as feared after a report showed a pickup in U.K. consumer confidence.
Yellen speaks Friday at an annual gathering of central bankers in Jackson Hole, Wyoming, after comments by Fed officials in the past week signaled the economy is strong enought to withstand higher borrowing costs. Odds of a rate increase this year climbed to 57 percent this week even as evidence of uneven global growth casts doubt over the central bank's willingness to tighten policy amid monetary easing in Asia and Europe.
"Don't expect Yellen to give a clear guidance in Jackson Hole," said Ulrich Leuchtmann, the Frankfurt based head of currency strategy at Commerzbank AG. "The Fed is data dependent at this point. Yellen's topic is the "Fed's toolkit' and in talking about this she has to speak about expansionary instruments as well. She may say she can act in all directions. There is risk of market misinterpretation.."
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