Powell to the rescue

It's safe to say that investors were pleased with Jerome Powell's first day of testimony on Wednesday, with equity markets jumping on his dovish assessment.

The Fed Chairman doesn't typically provide strong and direct messages on policy direction, which makes predicting future rate movements all the more difficult. But Wednesday's message was clear, the data is softening - particularly on the inflation side - and downside risks are significant. What was very notable was his view that a strong jobs report is only one of a large batch of indicators that the Fed monitors, despite the widely held belief of its importance.

It was also very notable that he did not attempt to pare back expectations for an interest rate cut later this month. He and the rest of the committee will be very aware of how markets are positioned right now and yesterday would have been the perfect opportunity to address that but he didn't. There is still a question lingering over how many we'll see this year but I guess we'll have to be patient on that one, although markets are still expecting aggressive cuts.

The second day of testimony is often largely a rerun of the first, from a monetary policy perspective. That won't stop traders keenly watching for signals though, particularly around the prospect for more cuts this year.

Gold buoyed by Powell but still short of recent highs

Gold was certainly buoyed by Powell's comments which knocked the dollar and spurred the rally. The yellow metal held firm above the key $1,380 support level before jumping back above $1,400 where it continues to trade today. We're still a little below the recent peaks just shy of $1,450 though and another failure to break above here may signal exhaustion for the rally.

One thing that will be interesting today is how traders respond to Powell's dovish comments. I can't imagine he'll stray too far from yesterday's delivery but will that be enough to weaken the dollar further, price in more aggressive easing and lift gold back to those highs? I'm not convinced but continued weakness in the data and a disappointing earnings season may in the coming weeks.

Bitcoin tumbles on Powell's Libra comments

Jerome Powell's testimony had a big impact on bitcoin on Wednesday, putting further focus on today's appearance in front of the Senate Banking Committee. The cryptocurrency tumbled as Powell was questioned about the Fed's approach to Facebook's recent announced Libra coin, something that could have direct consequences for the entire space in the years to come.

Ultimately, there was nothing shocking in the testimony and anyone that is surprised by how much work lies ahead and how long it may take was kidding themselves. This is actually good news as regulation has long been something that's held the space back and the Fed taking a serious, thorough and long-term approach is positive. But obviously, this is a very volatile and emotional market and perhaps this is not what traders wanted to hear, especially after such a good run of price gains.

The drop off hasn't been too severe though after price once again stumbled around $13,000 so I think there's probably an element of profit taking to this and beyond today, unless Powell says something outrageous, may not hold it back too much. That said, this is a very volatile market and violent swings in either direction wouldn't come as a surprise to anyone.

Oil buoyed by inventory data

Oil is trading higher again on Thursday, buoyed by a combination of positive market sentiment and the inventory data we've seen over the last couple of days. EIA didn't only back up the API release but exceeded it, continuing a recent trend of large drawdowns. With the US back in talks with China, OPEC+ extension confirms and drawdowns been recorded, it's looking quite a bullish environment again for oil, with the only concern being demand growth and the economy.

WTI is trading back above $60 though which is significant as this had looked an interesting resistance level. If it can hold onto these gains to the end of the week, it could be a strong bullish signal in the coming weeks.