CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Markets await Powell testimony and FOMC Minutes

Financial markets ambled overnight, as traders prepare for several days of central bank related event risk.

Markets tread-water

Financial markets ambled overnight, as traders prepare for several days of central bank related event risk. Wall Street traded flat, with the S&P 500 closing slightly higher on another day of thin volumes. Though a bounce in tech shares did support a rally in the US tech 100 cash (NASDAQ). However, the ASX 200 ought to defy the torpor, with SPI Futures pointing to a roughly 30-point jump at the open today. The USD is up across the board, as traders prepare for a slew of Fed-speeches to end the week, pushing the Australian Dollar, in turn, to around the 0.6930 mark. While both oil and gold are marginally higher.

ASX200’s second day of declines

The ASX 200 continued to fade from last week’s 11-and-a-half year highs yesterday. But again, despite what was a day of reasonably broad-based losses, volumes were light, suggesting a market not too perturbed by the current state of things. Higher bond yields have drawn flow away income stocks, while the lower risk appetite has kept investors away from growth stocks. And at a slightly more “micro-level” for the market: financials sapped the ASX 200 the most during Tuesday’s trade, erasing 10 points from the index, on the back APRA’s announcement it requires the banks increase its reserve capital by 3% by 2024.

The Aussie consumer in focus

Australian markets will get a feel on the domestic economy today. Westpac’s Consumer Sentiment survey is released, and ought to provide some insight into the current state of the Australian consumer. Today’s print takes on slightly greater importance, too: the market has the opportunity to assess some of the impact that recent rate cuts, tax cuts, changes to lending standards, and a nascent reversal in Aussie property prices is having on consumer sentiment. As stated repeatedly by the RBA, consumption remains one of the main drags and risks to the economy. Investors will be hoping for signs in today’s data that this trend is turning-around.

Chinese inflation worth watching

It probably won’t move markets: but the release of Chinese inflation numbers is one to watch today. A key structural concerns for central bankers, especially the US Fed, is the absence of adequate price growth in the global economy. Though the causes for this are complex, one significant factor is China’s exporting of deflation to the rest of the world – especially to the United States. US CPI and Chinese PPI are tightly related, and have recently trended lower together. Today’s Chinese inflation data may provide a handy insight into the prospects for US price-growth, and therefore the willingness and ability for the US Fed to cut rates in the future.

Fed Chair Powell testifies tonight

The timing and extent of rate cuts from the US Federal Reserve will literally be at centre stage tonight. US Fed Chair Jerome Powell testifies before the US Congress, and will be fielding questions about the state of the US economy and the likely course for interest rates. Financial markets haven’t bowed on the notion that the Fed will be cutting rates by 25 basis points this month, despite limited data to suggest such action is necessary. Markets will be watching for what guidance Powell provides – and how congruent this message is with the FOMC Minutes to be released later that night.

What’s the case for a cut?

A curious point will be how Chairperson Powell justifies any dovish bias he happens to adopt. An “insurance cut” is what’s recently been flagged to the market by the Fed. But on what tangible basis has this bias emerged? Indeed, the global economy is weakening, and the trade-war is exacerbating this; while US inflation is a little sluggish. So, the rationale is simple to grasp. However, with the labour market solid, retail sales around its long-term average, the S&P500 at all-time highs, and economic growth above trend, would an “insurance cut” right now really be consistent with Fed’s supposed commitment to data dependence?

Can Powell release the doves?

The answer can’t be the categorical “yes” that interest rate market pricing currently implies. But nevertheless, as far as the market is concerned, a rate cut on July 31st is a sure thing. And, of course, the market doesn’t care about sensible policy in the short-term; it will respond to promises of looser financial conditions, and tacit pledges to support risk assets. It’s here though, that the risk lies. The market believes this Powell-led-Fed will bend to the will of the market – arguably like it did in early January. If Powell doesn’t unleash the doves, then the consequent re-pricing in rates markets will surely dent risk-appetite.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Seize your opportunity

Deal on the world’s stock indices today.

  • Trade on rising or falling markets
  • Get one-point spreads on the FTSE 100
  • Unrivalled 24-hour pricing

See opportunity on an index?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on an index?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Get spreads from one point on the FTSE 100
  • Trade more 24-hour indices than any other provider
  • Analyse and deal seamlessly on smart, fast charts

See opportunity on an index?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.