Powell's testimony: No surprises

Powell indicated that elevated inflation is not the only risk and acknowledged the US economy is no longer overheated

By Farah Mourad | 10 July 2024

Market open
  • RBNZ left interest rates unchanged

  • Gold prices saw mild gains

  • Despite the inventory drop, oil is trading lower

United States Market

The first day of Fed Chair Jerome Powell's semi-annual testimony was largely uneventful, with no major surprises. Powell kept the door open for a potential rate cut in September, but emphasized that the Federal Reserve is not yet confident in inflation trends.

Powell noted, "Elevated inflation is not the only risk we face. He also acknowledged that the US economy is no longer overheated, with the job market cooling to pre-pandemic levels.

Given the two-sided risks, a rate cut by the Fed in September seems likely.

New Zealand Market

The New Zealand Dollar (NZD) dropped after the Reserve Bank of New Zealand (RBNZ) left interest rates unchanged, in line with market expectations. However, the RBNZ expects headline inflation to return to the 1-3% range in the second half of the year, which has boosted market hopes for a rate cut.

Chinese Market

Chinese CPI inflation slowed from 0.3% to 0.2% year-over-year in June (expected 0.4% YoY), while PPI inflation came in at -0.8% YoY (expected -0.8% YoY), compared to -1.4% YoY in May.

Gold Market

Gold prices (XAU/USD) traded with mild gains during the early European session today. Speculation that the US Federal Reserve might start cutting rates as early as September continues to support the non-yielding metal. Additionally, political uncertainties within Europe and globally might boost gold prices, as it is traditionally seen as a safe-haven asset.

However, China's central bank paused gold purchases for the second consecutive month, which might prompt traders to reduce bullish bets on the metal, considering China is the world's largest gold consumer.

Energy Market

The American Petroleum Institute (API) report showed a 1.9-million-barrel drop in US oil inventories (expected -0.2 million barrels). Despite the drop energy commodities traded lower, with oil dropping by 0.8%.

Currency Market

The Euro (EUR) and British Pound (GBP) were the best-performing major currencies, while the New Zealand Dollar (NZD) and Japanese Yen (JPY) lagged behind.