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Federal Reserve Chairman Signals Confidence in Inflation Decline, Leading to Weaker Dollar

The dollar has fallen across the board. Federal Reserve Chairman Jerome Powell said on Wednesday that he believes the Fed will have the confidence in the decline in inflation needed to begin cutting interest rates in the “not too distant future.”

Meanwhile, the euro was flat in the early going after the European Central Bank (ECB) left its policy interest rate unchanged on the 7th as expected. However, it has since risen, recording its first significant rise against the dollar in about a month. It hit a six-week high.

“We’re in the right place,” Powell said in testimony before the Senate Banking Committee, “waiting for confidence that inflation is sustainably moving toward 2%.” “There is,” he said. See more Powell said at a House Financial Services Committee hearing the day before that the timing and pace of rate cuts would be determined solely by economic data.See more

“Powell’s comments seemed more dovish than the day before,” said Mark Chandler, chief market strategist at Bannockburn Global Forex in New York. He said investors’ increased risk appetite was also weighing on the dollar.

The euro/dollar exchange rate rose 0.45% to $1.0944.

The ECB has taken a cautious stance on lowering interest rates this year.

“There is a clear decline[in inflation]underway and we are making good progress towards our inflation target. As a result, we are more confident,” ECB President Lagarde said at a press conference after the Governing Council meeting. , it’s not enough.” “We did not discuss rate cuts at this board meeting,” he said, but “we have just begun to discuss reducing our restrictive stance.”See more

Vipan Rai, head of North American foreign exchange strategy at CIBC, said the discussions suggested “the ECB is getting closer to the starting point of tapering stimulus.”

Analysts also said that the euro’s strength on the day was more due to the weaker dollar than any major change in investor attitudes towards the euro.

Meanwhile, the Japanese yen recorded its biggest rise against the dollar this year. Speculation has increased that the Bank of Japan will raise interest rates as early as this month.

The dollar/yen pair fell 0.92% to 148.04 yen, the lowest in more than a month.

Bank of Japan Councilor Junko Nakagawa gave a speech at the Shimane Prefecture Financial and Economic Council on the 7th, stating that the economic and price situation is on track to achieve the 2% price target, with clear signs of change in corporate attitudes regarding wage setting. “We are making steady progress” towards this goal, he said.See more

GBP/USD rose 0.58%.

Among crypto assets (virtual currencies), Bitcoin rose 1.8% to $67,681.

NY foreign exchange market:

With the release of the US employment statistics for February the next day, yields on government bonds fell.

The yield on the 10-year Treasury note fell 1 basis point (bp) to 4.092% in late trading. At one point, it was 4.054%, the lowest level since February 5th.

The yield on the 10-year Treasury note has fallen from a three-month high hit last month, on the back of growing expectations that the Federal Reserve will cut interest rates. “Treasury yields will fall a little bit further as we get closer to the start of the Fed rate cuts,” said Guy Lebas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.

Federal Reserve Chairman Jerome Powell, in testimony before the Senate Banking Committee on Wednesday, said he believes the Fed will have the confidence in the decline in inflation needed to begin cutting interest rates in the “not too distant future.” “If the economy progresses significantly as expected, it would likely be appropriate to begin reducing policy restraints at some point this year,” he said in testimony before the House Financial Services Committee the previous day.See more

According to CME FedWatch, the market has priced in a 72% chance that the Fed will begin cutting interest rates in June.

In late trading, the yield on the two-year note was 4.508%, the lowest level since February 15th.

Mi Financial・Bond Market:

Continued growth. The S&P 500 (.SPX), opens new tab rose 1% to a new all-time high. The Nasdaq Composite (.IXIC), opens new tab also rose 1.5%. Technology and growth stocks led the rally on optimism over the outlook for Fed rate cuts. The Philadelphia Semiconductor Index (.SOX), opens new tab rose 3.36%, outperforming the broader market and hitting a record high as semiconductor companies are expected to benefit from expanding demand for artificial intelligence (AI). I added.

The Nasdaq hit a new all-time high, but fell just short of its closing high.

In testimony before the Senate Banking Committee on Wednesday, Federal Reserve Chairman Jerome Powell said he believes the Fed will have the confidence in the decline in inflation needed to begin cutting interest rates in the “not too distant future.”See more

As a result, expectations for an interest rate cut in June have increased. Markets had stalled in the days leading up to Powell’s Congressional testimony.

“(Powell) has effectively signaled that there is a possibility of a rate cut this year, which the market wanted to hear,” said Anthony Sagrimben, chief market strategist at Ameriprise Financial. He pointed out that he was impressed. He said these data support the outlook that employment will slow but remain resilient.

He also pointed out that the employment statistics released on the 8th are being closely watched to further assess the state of the labor market.

“Everyone was bracing for something bad to happen, but nothing bad happened to the economy, markets, corporate profits or policy,” said John Augustine, chief investment officer at Huntington Private Bank. “It’s not happening. That’s why the momentum is building.”

Nine of the 11 major S&P sectors rose. Information technology (.SPLRCT), opens new tab led the rise by 1.89%, and communication services (.SPLRCL), opens new tab rose 1.84%. Meta Platforms (META.O), opens new tab rose 3.2%, while semiconductor giant Nvidia (NVDA.O), opens new tab rose 4.5%. Women’s underwear brand Victoria’s Secret (VSCO.N), opens new tab, plunged 29.7% after disappointing full-year earnings forecasts. Supermarket giant Kroger (KR.N), opens new tab, rose 9.8%. The sales and profit outlook for the full year exceeded market expectations.

US stock market:

Gold futures rose for the sixth consecutive day amid deep-rooted expectations for a US interest rate cut. The settlement price (equivalent to the closing price) of the main contract month, April, rose $7.00 (0.32%) from the previous day to $2,165.20 per ounce, setting a new all-time high for the fifth consecutive business day.

The dollar depreciated against the euro amid growing expectations for a US interest rate cut. Buying of gold became dominant as products traded in dollar terms appeared undervalued.

Demand for gold as a safe asset amidst the instability in the Middle East continued to support the market.

NY precious metals:

Prices fell slightly, weighed down by concerns about a slowdown in energy demand in both the United States and China. The settlement price (equivalent to the closing price) of the April contract for the standard U.S. oil grade WTI was $78.93 per barrel, down $0.20 (0.25%) from the previous day. The May contract was $78.32, down $0.09.

NYMEX Energy:

This is a provisional value based on LSEG data.The previous day’s ratio may not match

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2024-03-07 22:17:00
#Market #Summary #7th #Dollar #falls #yields #fall #hits #high

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