Global Market Insights - Forex, Futures, Stocks

Spotlight falls on Fed Chair Powell’s testimony

Duration:: 4m
Broadcast on:: 09 Jul 2024
Audio Format:: mp3

Dollar stays on the back foot ahead of Powell. Euro gains ground after French vote. Yen steady as BoJ discusses bond purchases. Wall Street extends rally, gold pulls back.

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Welcome to another episode of Global Market Insights, brought to you by XM.com, where we provide meaningful and informative content about the events that affect market trends and shape global markets. It's Tuesday the 9th of July, 2024, and you're listening to the Market Comment podcast by Harold Lambusby-Suros. I'm Maria Bushard of the Ace, thanks for joining us at XM.com. The dollar continued losing ground against most of its major counterparts on Monday, gaining somewhat only against the frank and the kiwi. With no major catalysts to drive the world's reserve currency yesterday, traders may have maintained some of their short positions initiated after Friday's employment report corroborated the notion of two Fed rate cuts by the end of the year. Today, the spotlight is likely to turn to Fed Chair Powell's semi-annual testimony before the Senate Banking Committee. He will deliver the same report on Wednesday before the House Financial Services Committee. Last week, at the ECB Forum on Central Banking and Central Portugal, Powell said that they are getting back on the disinflationary path, adding though that they want to be more confident about inflation's return towards their 2% target before they start loosening policy. With that in mind, he is unlikely to deviate much from what he said last week, especially after Friday's evidence of a further cooling in the labor market. Kind of he insists that they would like to see further progress on inflation. Should he highlight again that recent data indicates inflation is entering a downward path, the dollar is likely to suffer a bit more. However, any Powell-related slide is unlikely to be massive, as the market is now fully pressing in two rate cuts by December, already assigning an 80% chance for the first cut to be delivered in September. Elsewhere, the euro finished Monday well in the green, despite opening with a negative gap after the elections in France resulted in a hung parliament. Perhaps investors re-examined the outcome and concluded that although a hung parliament could lead to political gridlock, it also lessens concerns stemming from far right or far left fiscal agendas. The yen traded virtually unchanged against its U.S. counterpart after dollar yen found support near the key zone of 160.35. Today the BOJ began holding in-person meetings with Japanese government bond market participants, banks, securities firms and bond buyers for financial institutions aimed at figuring out a realistic pace for reducing its own JGB purchases. The bank will announce the reduction plan at its upcoming meeting, but what could really shake the yen may be whether policymakers will hit the rate hike button. Currently investors are assigning a 60% chance for a 10 basis point hike this month. On Wall Street, both the SMP500 and the NASDAQ continued conquering uncharted territories, and they may continue doing so if Powell satisfies investors' rate cut bets. But with the earnings season beginning on Friday, traders may turn more cautious towards the end of the week, thereby resulting in a small setback. Despite the greenback extending its slide, gold traded lower, perhaps on reports that China didn't make any purchases in June following a reserve freeze in May. The precious metals slipped and hit the $2350 zone, but in no way did the retreat suggest that the outlook has turned bearish. Fed rate cut expectations could soon help the price rebound while the risk of the Trump election in the US may prompt China to re-accelerate its purchases on concerns of worsening US China relations. Policymakers may continue eliminating their dollar dependency to minimize the economic damage in case the US decides to weaponize its own currency. Thanks for listening. This was today's Market Comment here at XM.com. Thank you for listening to another episode of Global Market Insights brought to you by XM.com. For more in-depth technical and fundamental analysis, be sure to visit www.xm.com/research. [BLANK_AUDIO]