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Here's what usually happens in markets after Janet Yellen's speeches

Federal Reserve chair Janet Yellen will speak at the Economic Club of New York later Tuesday.

On days like this, when stocks are going nowhere ahead of the speech, many market headlines would suggest that investors are pausing to hear what Yellen says.

However, the immediate reaction is usually “underwhelming”, according to Alan Ruskin, global co-head of foreign-exchange research at Deutsche Bank.

In a client note Tuesday, Ruskin wrote that the absolute change in the S&P 500 on speech days is 0.34%.

That’s about half the median change on FOMC policy announcement days, and a third of the moves on recent jobs days.

The impact on the dollar has been minimal and positive. And on the inflation-sensitive two-year yield, the median reaction is usually a two-basis-point rise.

For Tuesday’s speech, Ruskin says the market will be looking for more clarity on what the Fed is actually trying to do.

The FOMC lowered its expectations for rate hikes this year at its March meeting. But since then, at least four regional Fed governors have said things that suggest the committee is more hawkish than it sounded two weeks ago.

Ruskin wrote,

After the Yellen speech we expect the market to remain very reluctant to price in an April hike. This should still work with the assumption of a long enough period without Fed tightening to foster some moderate follow through to the risk positive environment. The initial reaction will be restrained in part because participants will wish to avoid getting whipsawed by key data at the end of the week.

Ruskin says that Yellen will be waiting for the jobs report and ISM manufacturing survey on Friday to decide whether a rate hike next month would be appropriate. But he thinks the Fed would sit out the next meeting, with markets pricing in only an 8% chance of a hike.

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