Daily FX Market Review: JPow Reports Inflation Progress, Eyes Future Rate Cuts

By Investor Empires On Jul 9, 2024

Federal Reserve Chairman Jerome Powell (“JP Powell”) Mr. Trump began two days of testimony in both chambers of Congress: the Senate Banking, Housing and Urban Affairs Committee today and the House Financial Services Committee tomorrow.

In the United States, the Chairman of the Federal Reserve must report to Congress twice a year. dual mandate To promote maximum employment opportunities and price stability.

Testifying before Congress is a way to report on progress toward these goals and how the Fed plans to achieve them.

Topics under questioning include future monetary policy and updates on the state of the economy, including: growth, employmentAnd economic inflation.

This testimony allows for dialogue between the Fed and Congress, where lawmakers can express concerns, ask questions, and provide “comments.”

In other words, it’s an opportunity for them to criticize or mock the Fed chairman live on television.

Powell’s appearance before the Senate was his second public remarks on inflation this month. On Tuesday in Portugal, he said the latest inflation figures for April and May suggested that we were moving toward lower inflation.

So what did he say this time?

During that Senate CertificationJP Pow highlighted the difficult balance the Fed faces between Reduce inflation and maintain a strong labor market.

He noted that while inflation is a major risk, labor market data shows it has slowed considerably. Powell cited significant progress toward lowering inflation but said The timing of the interest rate cut remains unclear..

The Fed is wary of cutting interest rates too early, which could reignite inflation, and is aware of the risks of keeping rates too high. high for too long, saying it could hurt economic growth.

related economic inflationHe admitted that the first-quarter data did not give them much confidence that inflation would return to their 2% target, but recent inflation readings have shown some improvement. Another modest advance And More “good data” This will be essential to boost their confidence.

Powell also stated that growth This year has slowed down compared to last year, primarily due to Consumer spending slows but remains strong.

As for the JMonitoring marketHe described it as “strong, but not overly inflationary,” with the resulting high unemployment rate. More people are looking for work Rather than a lack of jobs, Powell noted that recent jobs numbers send a clear signal that Labor market conditions have slowed significantly.

(In a separate hearing before the House Financial Services Committee in Washington, Janet Yellen She expressed similar views to Powell, describing the labor market as strong but facing less pressure that would create inflationary concerns.

The main takeaway from all this is that Powell has finally publicly admitted that they are now More focus on when interest rates will be cut Because balancing inflation and keeping the labor market strong has become more difficult.

The Fed wants to avoid causing a recession, so if the upcoming data looks good, it will start cutting interest rates in September.

Market gives September rate cut 70% chance (Compared to 63% a week ago).

If new data comes out that pushes this possibility higher, wait for the US dollar. double.

The next important piece of data from the economic calendar is: Consumer Price Indexwho brings this out Thursday.

Forex Market Drivers

Let’s review the price action in Forex today.

Which currency pairs made the biggest gains today?

australian dollar/japanese yen He was the leader of the group, and got 0.40% or 43 points.

As explained by us Foreign exchange market drivers Page, the top 5 gainers had very small gains.

look at me AUD/JPY Trend Following RatingHe showed strength. rising Evaluation for about a month.

But the AUD/JPY Overbought/Oversold Rating He appears “Overpriced“So be careful if you’re not already tall.

Which currency pairs lost the most today?

GBP/AUD He was the biggest loser, as he fell. 0.22% or 41 points.

currency strength

What is the overall strength or weakness of the individual major currencies today?

Based on currency strength meter On MarketMilk™, Australian Dollar It was the strongest currency, while JPY It was the weakest currency.

If we dig a little deeper and look at how the major currency pairs work Moved in the last 24 hoursWe can see USD/JPY Gathering during J.P. Bowe’s testimony.