No Big Movements As Powell Reiterates Dovish Stance

Federal Reserve Chair Jerome Powell told the House Financial Services Committee Wednesday that it was still too soon to scale back asset purchases while acknowledging that recent inflation readings had been “higher than expected”. On the other hand, he said that if high inflation persisted “we would absolutely change our policy as appropriate”.

In short, Powell reiterated his dovish stance and signaled that the Fed will be patient in tightening monetary stimulus since ‘substantial further progress’ is still a ‘ways off’.

The U.S. dollar slightly weakened after Powell’s speech but there were no significant market movements.

Powell will face more questions from the Senate banking panel today.

Summer is in the markets and given a lower-liquidity backdrop across many markets during the summer months the potential for range-bound conditions is high. We therefore recommend traders staying on the sidelines during these low-liquidity periods, taking a break from the markets and adjusting risk exposure. The next major risk event will be later in the summer with the Jackson Hole Economic Symposium August 26-28.

We will take our annual summer trading break from August 2 to August 20 but will adjust risk exposure even in the month of July.