We're back in wait and see mode on Wednesday as the investment community waits patiently for Jerome Powell's testimony.

The Fed Chairman will appear before the House Financial Services Committee early in the US session to testify on the semi-annual monetary policy report and investors are keen to see whether the central bank is falling more in line with the markets thinking or maintaining the resistance.

We have seen a shift in recent months but the messages we've had so far show a strong reluctance to cave to the pressure, both from the White House and the markets. This is understandable as such a change will effectively be an admission that they were wrong to hike in December and further fuel the wave of anger towards them from President Trump.

A July cut looks a foregone conclusion at this point but recent communication has dramatically pared back expectations that the cut will be 50 basis points. But what about the rest of the year? That's what we're hoping to learn from Powell later today.

On the back of last Friday's jobs report, further suggestions that the Fed intends to be patient, meaning fewer cuts than markets are pricing in, may not be taken well. Markets continue to price in multiple cuts but equities didn't show the same resilience since Friday so could potentially suffer while the dollar could be further lifted by a less dovish tone. Powell will likely be careful to leave the door ajar though for fear of upsetting investors too much.

One factor that may encourage Powell to soften his stance a little was highlighted in Tuesday, as the New York Fed's recession indicator rose to 32.9%, the highest since 2009. A reading above 30% has preceded every recession since the 1960s so perhaps Powell will feel more justified in offering a more dovish assessment.

Dollar holds above $1,380 ahead of Powell

The rebound in the dollar has taken the edge off gold in recent sessions, which had prior to that been on a stellar run. The failure to make a new high last week highlighted the belief that traders don't have full confidence in the Fed to back down easily, which ultimately resulted in a relatively sharp pull back.

This could continue later if Powell refuses to budge, although there's a long way to go before the rally is wiped out. We continue to trade below $1,400 this morning but the key level is $1,380, a break of which could trigger a sharper move lower. The next notable level below here could fall around $1,350-1,360.

Oil buoyed by inventory data

Oil was given a boost in Tuesday after API reported another significant reduction in inventories putting additional focus on the EIA release today which is typically the more favoured report. Should it confirm, or even outshine, the API report it could provide a further lifted to oil prices as they approach their recent highs.

WTI crude remains below $60 at the moment, despite the drawdown, but that could come under a lot more pressure today if the EIA report confirms the decline. Above here, $61-62 could be interesting.

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