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A closeup on Fed chair Powell's semiannual testimony
The Fed's continued vigilance regarding inflation risks was emphasized
Fed remains vigilant about inflation risks.
Gold climbs towards $2,140 during early American session
Benchmark 10-year US Treasury bond yield remains negative
Powell's testimony
The release of Fed Chair Powell's semiannual testimony triggered a series of market movements and reactions. Powell's speech highlighted several crucial points regarding the economy and monetary policy, including the ongoing uncertainty surrounding progress toward the 2% inflation target. The Fed's continued vigilance regarding inflation risks was emphasized, alongside suggestions that the balance between job growth and price stability is improving.
Moreover, Powell hinted at the potential for rate cuts later in the year but stressed the necessity for more confidence in inflation before such actions are taken. This cautious approach was echoed in his acknowledgment that the policy rate may have peaked for this cycle. Despite acknowledging the economy's significant progress over the past year, Powell cautioned against the risks associated with timing rate cuts, highlighting the delicate balance required.
Market reaction
In the wake of Powell's testimony, the market response was relatively muted, with Wall Street indices opening higher and the USD showing little immediate reaction. Notably, the Nasdaq-100 futures rebounded from yesterday's losses, showcasing resilience amid broader market movements. This recovery was evident as the index broke through resistance levels and tested new highs, indicating a degree of investor confidence despite the uncertainties outlined by Powell.
Gold gained momentum and surged towards above $2,140, the rise in gold prices coincided with the benchmark 10-year US Treasury bond yield remaining in negative territory.
BoC decision
The Bank of Canada's decision to maintain interest rates at the 5% level, consistent with market expectations, had an immediate impact on currency markets. Specifically, the USD/CAD pair experienced a decline following the announcement. This reaction suggests that market participants interpreted the Bank of Canada's decision as a sign of confidence in the Canadian economy, leading to a decrease in demand for the US dollar relative to the Canadian dollar.
