Powell Stays the Course as Markets Stutter
Rowan Crosby • 2 min read
Jerome Powell was back for a second day of testimony on Capitol Hill and once again reiterated his stance on further rate cuts.
Yesterday, he made it known the Fed was standing ready and able to act on rates and markets took that as a sign that he was locking in a July rate cut. Nothing really changed for day-two and now markets have priced in 31bps of rate cuts at the next meeting.
That would suggest one cut is fully priced in at 25bp while there is a slim chance of a larger cut. That said the yield on the US 10-year bond jumped to 2.14% as traders did wind back some of that built-in reduction.
Generally speaking, all the markets that moved on the Wednesday, pulled back after the initial reaction to a high chance of a July cut.
The SPX was higher while the other major indices were mixed. The must-watch USD was mixed, was back around the 97.00 handle with a bit of upside after yesterday’s fall.
GOLD pulled back sharply but is still above the $1400 level for the time being, after being right on the edge of a breakout to the highs.
WTI jumped and is now back trading at the $60 level, which should provide plenty of resistance for the time being.
Asian Market Outlook
There isn’t much data around of interest early in Asian trade today. The AUD/USD and NZD/USD are both ticking higher at the moment, but only marginally.
There is some semi-important Chinese data due out today, but that likely won’t be out until the European session. But it will likely have an impact on both pairs.
The expectation is for a deterioration in both exports and imports in June, which will likely weigh on the overall trade balance negatively. The fallout from the US-China trade wars looks like it is having an impact on the China data.