Will Powell satisfy investors craving for cuts?
It’s shaping up to be a relatively slow morning in European trade, as investors await the first testimony from Fed Chairman Jerome Powell.
Powell is due to appear before the House Financial Services Committee to testify on the semi-annual monetary policy report, an appearance that comes at a time when the Fed’s policy direction is both crucial and unclear.
This year, the Fed has effectively become the only game in town, as far as investors are concerned. Growing trade tensions between the US and China, a murkier global economic outlook and more modest performances from corporate America have left investors feeling anxious. The economy alone can no longer support the stock market which has forced the Fed to play a more active role and likely reverse some of its tightening of last year.
The Fed has reluctantly opened the door to doing so but market pricing is quite aggressive and the central bank is yet to either catch up or better manage expectations, perhaps out of fear of the market repercussions and backlash that would inevitably follow from the White House.
Either way, all eyes will now be on Powell who will likely be heavily grilled on the central banks intentions. I’m sure we can also expect the odd dose of harsh criticism from certain politicians loyal to Trump.
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