Trump eyes Powell, so should you

January 10, 2019

A relatively quiet Thursday for announcements, but attention turns to a speech by the under-fire Fed Chair.

The USD again weakened overnight, due to the release of the minutes from the last Fed interest rate meeting. The minutes pointed to a slower path to interest rate rises. The EUR/USD opened at $1.14394 and dipped to an opening hour low of $1.14353. The pair picked up after that and remained steady throughout early and mid-session trading before rallying late in the trading day. The euro peaked at $1.15572 before falling back ever so slightly to its current level of $1.15526. The GBP/USD was a bit more volatile as the UK deals with issues surrounding Brexit. The pair opened at a low of $1.27076 and rallied in early trading, climbing to $1.27768 before falling to $1.27148. The pound then rallied to a high of $1.28032 before again falling to $1.27335. It was not finished as it surged back up to a near-session high of $1.28028. It is currently trading at $1.27967.

Indices remained largely flat as they take a breather from a volatile start to the year. The Dow opened at 23,738.51 and dipped to an opening-hour low of 23,731.03. It then climbed gradually throughout the day until it hit a high of 23,981.02 late in the day. It could not hold onto all of those gains as it declined in very late trading. It is currently sitting at 23,821.00. The Dax remained mostly steady throughout trading yesterday. The German index opened at 10,883.73 and climbed during the first half of the session, peaking at 10,961.70. However, the Dax fell shortly afterwards, briefly hitting a low of 10,838.90. It recovered from those lows and closed at 10,898.40.

The day ahead sees attention turn to under-fire Fed Chair Jerome Powell. The Fed has been talking up the health of the economy and was taking a hawkish view on interest rate rises. This talk, along with the higher interest rates has been sending markets down as higher interest rates equates to higher repayments for businesses that borrowed money from the Fed during the GFC. Donald Trump has publicly criticised the Fed Chair for these interest rate rises. The fact that markets have reacted badly to interest rate rises has forced the Fed to take a more balanced approach to interest rates as the central bank tries to avoid sending markets in free fall. The speech by Jerome Powell tomorrow morning will be one that markets (and Trump) will be watching intently.

Data released today include:

China – CPI & PPI

Japan – Leading Indicators

NZ – Building Consents

UK – BRC Retail Sales Monitor

Australia – AIG Construction Index

Canada – Building Permits, NHPI

Europe – French Industrial Production, Italian Retail Sales, ECB Monetary Policy Meeting Accounts

US – Unemployment Claims, Natural Gas Storage, FOMC Members James Bullard and Charles Evans speak


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