Marketwatch North America

Daily Insights
July 10, 2024

During yesterday’s testimony to the Senate Banking Committee Fed Chairman Powell stayed close to FOMC’s recent script, dodging direct questions about the timing of rate cuts, instead redirecting attention to economic benchmarks: ‘more good data’ showing that inflation is on the path to ‘2% on a sustainable basis’. One fresh insight that Powell did offer was his comment that ‘inflation is not the only risk we face’, and further that ‘reducing policy restraint too late or too little could unduly weaken economic activity and employment’.

Powell’s testimony had little impact to implied rate cut probabilities: 72% chance of a September cut pre-testimony and 72.3% post-testimony. And the probability for a December cut was 80% pre-testimony and 79.9% post-testimony. Given this it should come as no surprise that U.S. treasury yields are virtually unchanged since Monday.

The dollar’s reaction to Powell’s testimony was modest vs. the G10, evenly splitting gains and losses. The dollar’s best 1-day spot return is +1.22% vs. NOK (taking its cue from lower oil prices).

The dollar lost ground against emerging market currencies: -0.48% vs. MXN, -0.43% vs. ZAR, and -0.38% vs. BRL, suggesting a shift to ‘risk-on’ sentiment.

The S&P 500 and Nasdaq 100 indexes reached new record highs yesterday, consistent with the risk-on theme. Powell not directly pushing back on market speculation of rate cuts before year-end has fueled a surge in risk assets.

Powell addresses the House Financial Services Committee today.

Tomorrow’s economic calendar includes CPI reading for June and weekly Initial Jobless Claims.

Economic Calendar

:
USD - Fed Chair Powell Testifies
:
USD - Final Wholesale Inventories m/m
:
CNY - CPI y/y
:
CNY - PPI y/y
:
USD - Crude Oil Inventories
:
USD - 10-y Bond Auction
:
NZD - Official Cash Rate
:
NZD - RBNZ Rate Statement
:
USD - FOMC Member Bowman Speaks
:
USD - FOMC Member Goolsbee Speaks
:
EUR - German Buba President Nagel Speaks
:
EUR - Italian Industrial Production m/m
:
USD - FOMC Member Cook Speaks
:
GBP - MPC Member Pill Speaks
:
GBP - MPC Member Mann Speaks
:
NZD - FPI m/m
:
GBP - RICS House Price Balance
:
JPY - Core Machinery Orders m/m

Market Indicators

Currency Pairs
Pair High Low
usd/jpy 161.657 161.3
eur/usd 1.08288 1.08109
gbp/usd 1.28367 1.27841
aud/usd 0.67504 0.67317
usd/cad 1.36428 1.36182
eur/gbp 0.84592 0.84316
usd/mxn 17.9012 17.7656
Equities and Commodities
S&P 500 5597.78
NASDAQ 20565.1
DOW 39335.8
GOLD 2379.26
SILVER 30.97

This document is for information purposes only and does not constitute any recommendation or solicitation to any person to enter into any transaction or adopt any trading strategy, nor does it constitute any prediction of likely future movements in exchange rates or prices or any representation that any such future movements will not exceed those shown on any illustration. All exchange rates and figures appearing are for illustrative purposes only. You are advised to make your own independent judgment with respect to any matter contained herein.