Fed Chair Jerome Powell poured cold water on the prospect of rate cuts in the near terms, pointing to stubbornly persistent inflation, boosting the US Dollar and US Treasury Yields.
- The Chair of the US Federal Reserve Jerome Powell spoke last night and made clear that inflation is proving to be unexpectedly high and is stubbornly refusing to continue its earlier decline. He drew the conclusion that it is not safe to cut rates yet and emphasised the Fed won’t be running into any rate cuts soon. This boosted the US Dollar, sending the 2-Year Treasury Yield to 5% for the first time in 5 months.
- In the Forex market, the US Dollar is holding its recent gains. Since today’s Tokyo open, the strongest major currency has been the New Zealand Dollar, and the weakest major currency has been the US Dollar. However, it is far from clear this is due to any change in sentiment, likely being a natural retracement. Yesterday saw the USD/JPY currency pair continue its rise to reach a new 34-year high not far from the big round number at ¥155. Trend traders will be interested here on the long side, although the breakout point is now some way below at ¥152.
- Gold continues to look firm, while Silver looks relatively bearish. Trend traders will still be interested in Gold on the long side, but less so in Silver.
- Speculation continues concerning an Israeli retaliatory strike on Iran. Israel has pledged to retaliate but is of course keeping the world guessing. However there seem to be hints that any retaliation will be calibrated to be quite weak, which may be helping the price of Crude Oil from rising any higher, which is probably President Biden’s major concern as he tried to persuade Israel not to retaliate at all.
- A few hours ago, there was a release of UK CPI data, which came in slightly higher than expected, at an annualized rate of 3.2%. This is down from the previous 3.4% but higher than the 3.1% which was anticipated. The Pound enjoyed a minor gain after this data was made known.
- We also saw a release earlier today of New Zealand CPI data, which came in as expected at a quarterly increase of 0.6%. This was slightly higher than the previous quarter’s increase of 0.5%.
- Markets are awaiting the release later of Australian Unemployment Rate data, while the Governor of the Bank of England will be speaking tonight.
- Anticipation is rising about the expected arrival of Bitcoin halving at the end of this week, likely on Friday. Bitcoin is well off its relatively recent high, and looks like it might fall further.
- The minor commodity Cocoa fell very strongly yesterday, suggesting that the long-term bullish trend may be over. The commodity superfood has almost tripled in value over the last year alone, with many analysts suggesting supply side shortages are at least partly to blame for the meteoric rise. There is more and more demand for Cocoa every year as it is coveted as a key ingredient for chocolate but also as a superfood in its own right.
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