Stocks Quiet After Hawkish Powell
The major US indices had a relatively quiet day as the Chairman of the Federal Reserve, Jerome
Powell advised that he did not see US inflation falling into the target range in the next year or two.
The Dow and the S&P 500 both finished the day in the red, down 0.22% and 0.04% respectively and
the Nasdaq rose 0.27%. The dollar reacted more strongly coming back better bid against all the
majors, the dollar index was up 0.4% on the day with USDJPY approaching the key psychological
level at 145.00. In contrast to the dollar move, US treasury yields slipped lower with the benchmark
10-year falling 5.6 bps. Oil jumped significantly, Brent up 2.8% and WTI up 2.8% as US stockpile data
showed a much bigger than expected drop.
Sintra ECB Forum in Focus
The European Central Bank’s (ECB) forum on central banking was in full flow in Sintra, Portugal this
week and this year there is much more focus on the messaging that is coming out to markets.
Investors are looking very closely at the ennui (I believe that is the collective noun for a group of
central bankers) of central bankers that have gathered there, and the message is very similar from
most of the major players – Inflation is not going away, and further tightening is required but we
believe that recessions can be avoided. The only outlier is the Bank of Japan which retain an ultra-
loose policy, and this has been reflected in the Yens weakness over the first half of the year. Market
pricing is not exactly in line with the expectations of the other major central banks and traders are
now picking through the noise for disparities. But, while the Central Banks are singing from the same
hymn sheet, data will start to become more paramount for traders especially if it starts to contradict
guidance and that is where we could see major trading opportunities in the coming months.
Powell in Focus Again Today
Traders are expecting another busy day ahead of them as more data hit the wires and we hear from
the Federal Reserve Chairman again. Australian Retail Sales are due out early in the Asian day with
the currency still reeling from the low CPI print yesterday. We have key inflation data due out of
Europe in their day with the expectation of a 0.2% increase, but the major focus will once again be
on Jerome Powell when he speaks in Madrid. The New York sessions see the latest GDP numbers out
of the states along with the weekly unemployment data.
