Traders continued to watch Fed Chair Jerome Powell’s testimony, but did the event move the markets that much?
Here’s how asset classes are reacting, plus other economic updates you need to know:
headlines:
- NAB Australia’s business confidence index improved from -2 to +4 in June
- Japan’s initial machine tool orders rose 4.2% year-on-year to 9.7% in June
- NAFSA Small Business Index June: 91.5 (90.3 expected, 90.5 prior)
- Fed Chair Powell Discusses Two-Way Risks to Easingciting a cooling labor market as reason enough to worry about late cuts.
- US Treasury Secretary Yellen reiterates Powell’s views On the risks of a slowing labor market
- Visitor numbers to New Zealand rose 4.0% year-on-year in May after an earlier decline of 8.8% (updated from an initial 9.4% decline).
- Japan PPI in June: 2.9% YoY (2.9% expected, previous reading raised to 2.6% from 2.4%)
Price movement in the broad market:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Treasury Yield, Bitcoin Chart by TradingView
The spotlight was on Federal Reserve Chairman Jerome Powell’s speech before the Senate Banking Committee on Tuesday, as market participants were keen to get more clues about the timeline for the U.S. central bank’s easing.
Although Powell refrained from providing clear guidance on when to cut rates, Treasury yields and the U.S. dollar rose during his testimony while gold fell. After all, the Fed chairman has indicated that they prefer to wait for more inflation data to give them confidence in easing monetary policy.
Meanwhile, crude oil posted another day in the red as investors liquidated their previous positions on reports that production in the Gulf Coast continued without major damage from Hurricane Beryl.
But the S&P 500 seemed unfazed, holding its ground through the event before eventually rallying to record highs alongside the Nasdaq, thanks to a surge in financial stocks and large-cap technology shares.
Forex Market Behavior: US Dollar vs Major Currencies:
Comparison between the US dollar and major currencies Chart by TradingView
The US dollar pairs saw sharp volatility throughout the day with a slight bullish bias, especially against the yen and the New Zealand dollar, as markets prepared for comments from Federal Reserve Chairman Jerome Powell.
His actual testimony led to a bullish move for the US currency, as traders likely focused on the need for the Fed to wait for more inflation numbers before eventually pulling the trigger on monetary policy easing.
However, the US dollar quickly regained ground against most of its peers, except against the Japanese yen and the British pound, as markets also priced in a higher probability of a September rate cut (70% vs. 63% from last week) based on the CME FedWatch tool.
Potential catalysts coming up on the economic calendar:
- Bank of England MPC member Bill’s testimony at 1:30pm GMT
- Speech by Bundesbank President Nagel at 2:00 PM GMT
- Fed Chair Powell Speech Before the House Financial Services Committee at 2:00 p.m. GMT
- US Energy Information Administration Crude Oil Inventories at 2:30 PM GMT
- Bank of England Monetary Policy Committee Member Mann’s speech at 3:30pm GMT
- FOMC Member Bowman Speaks at 6:30 PM GMT
- FOMC Member Goolsbee Speaks at 6:30 PM GMT
- New Zealand Food Price Index at 10:45 PM GMT
- FOMC Member Cook Speaks at 11:30 PM GMT
Powell has another speech. Markets are lining up today, this time in front of Congress, so another round of questions about the timing of a Fed rate cut could send USD pairs higher again.
Be sure to monitor More speeches from other FOMC officials (Bowman, Goolsbee, and Cook) as their comments may put Powell’s speech in perspective ahead of the US CPI release later this week.