Market optimism couldn’t survive to Jerome Powell’s testimony yesterday, as he said that a recession is possible, and that calling a soft landing is ‘very challenging’ under the current circumstances.  

More worryingly, Powell mentioned another risk: the risk of the Federal Reserve (Fed) not managing to restore price stability and allowing inflation to get entrenched in the economy.  

Major US indices closed the session slightly in the negative. The S&P500 lost 0.13% and Nasdaq slid 0.15%. The US 10-year yield eased however, as a sign that Powell’s testimony was already mostly factored in. The US dollar index eased.  

Powell will testify today, as well, but most of the negative pricing is certainly done by now. 

Finally falling? 

The barrel of American crude extended losses below $103 yesterday, as Powell’s speech pointed at a possible recession. The next important test for the oil bears is the $100 level. Many investors don’t expect a downturn in oil prices below this level, pointing at a tight global supply, and the resilient demand. Joe Biden’s 3-month gas tax relief could only increase demand and have no material impact for the overall market trend.  

Other commodities suffer, as well, as the recession fear takes a toll on demand prospects and bring investors to liquidate their long positions in preparation of a further downside correction. iShares Diversified Commodity index fell below the 100-DMA for the first time this year, and deeper decline is possible, given the risks of tighter monetary policies to the global economy. 

In this respect, the British FTSE index, which has a high concentration of oil and mining stocks, could lose its ytd advance versus its US peers.  

This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD retreats towards 0.6900 amid cautious markets

AUD/USD retreats towards 0.6900 amid cautious markets

AUD/USD is easing towards 0.6900, fading a renewed uptick amid a cautious market mood. The US dollar is attempting a bounce, as investors rethink the impact of aggressive Fed rate hikes on growth. A dip in the Australian business confidence survey also weighs on the AUD. 

AUD/USD News

USD/JPY drops towards 135.00 amid risk-aversion

USD/JPY drops towards 135.00 amid risk-aversion

USD/JPY is heading south to test 135.00, having failed to sustain above 135.50. The pair is falling in tandem with the US Treasury yields while the return of risk-off flows underpins the USD bounce. Focus shifts to US data. 

USD/JPY News

Gold bounces off $1,820 support zone, focus on US data, Fed’s Powell

Gold bounces off $1,820 support zone, focus on US data, Fed’s Powell

Gold Price consolidates recent losses at around $1,825.00 during Tuesday’s Asian session. In doing so, the yellow metal takes clues from the market’s cautious optimism ahead of the key US consumer sentiment numbers and the much-awaited central bankers’ debate at the ECB forum.

Gold News

ApeCoin price edges near a critical level, is the uptrend genuine?

ApeCoin price edges near a critical level, is the uptrend genuine?

ApeCoin price shows compression of two Simple Moving Averages as price consolidates. APE price shows bullish re-entrance on the Volume Profile pattern, but traders should steer away from being early buyers. Invalidation of the bear trend remains at $6.15.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures