FX Considerations Ahead Of Powell’s Testimony

FX Considerations Ahead Of Powell’s Testimony

Thin summer trading volumes will sustain a brief jolt as Fed Chair Powell testifies to Congress today (testimony starts at 15:00 London time but speech is released 90 mins before i.e. 8:30 Eastern/13:30 London) and tomorrow. The testimony and ensuing Q&A will shed further light on the probability of a rate cut later this month. It may be too soon for Powell to hint at the magnitude of the rate cut for Jul 31, but is it too soon to guarantee a rate cut at all for this month?

FX traders bear in mind the following: Powell has already stated the economic slowdown goes beyond the retreat in global trade i.e. not limited to the trade war. USD bulls argue that any rate cut would only be a one-time adjustment instead of an extended round of easing. USD bulls will also state that the magnitude of the rate cut does not matter because the ECB will inevitably follow with rate cuts and/or policy stimulus.

USD bears could point to the fact that the Fed has never conducted a policy easing shorter/smaller than two or three rate cuts over the last 30 years. Additionally, limited or no Fed easing will exacerbate the disinflationary challenge from USD strength. Powell can’t afford to get his price stability objective off the market.

Regardless of Powell’s message, it will be unlikely for him to be so committal 21 days before the Fed decision, during which we’ll get a few more vital macro data points. While trading opportunities should return, no trend-breaking moves are expected.

As important as the speech will be, do not disregard the Q&A with congressmen today and tomorrow, which could lead to several potentially market-moving unscripted remarks/answers from Powell.

FX Considerations Ahead Of Powell’s Testimony

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.