- Fed Chief Powell to Speak as Tapering Signaled
- ECB President Remarks also in Focus
- Markets Calm Despite Yield Spike
The Euro and Sterling forex market, in particular, has continued to come under strain this week as a number of factors keep the US Dollar strong against all comers. The latest solidification of this strength came in recent days as Fed Chief Powell signaled a more hawkish intent from the Federal Reserve. He is set to speak again later today. Also making an address during the European session will be the ECB President as the Eurozone continues to battle ongoing inflation issues. Stock markets remained calm after the bell following a day that saw a strong advance in US Treasury yields.
Powell Testimony to be Closely Watched
He has been among the most ardent supporters of fiscal stimulus throughout the COVID-19 pandemic period. This may still be the case, but this week has marked what many analysts, and some of those in forex trading, see as a key shift from Federal Reserve Chief Jerome Powell. His tone this week would imply that the US is closer than ever to tapering bond-buying and taking a firmer approach to the economy.
This has been seen as much needed for quite some time from many around the Fed, including Fed Presidents in many states nationwide. For that reason, Powell’s testimony in front of congress today will be keenly watched as he is expected to adopt a more hawkish tone but at the same time retain a measured outlook on a strong economy as he sees it.
ECB President to Continue Supportive Message
Another important figure at this time, is ECB President Christine Lagarde. She is set to speak later today with the Euro languishing closer to 1.17 amid the strong US Dollar although the latter did ease off slightly yesterday as Treasury yields moved up.
Lagarde is expected to repeat her position that the current high rate of inflation in the bloc is something temporary and that such pressures will continue to ease as normality returns without the need for further fiscal intervention. At the same time, Europe remains very much impacted by movements stateside and how the market reacts to policy and economic data there.
Yield Increase Keeps Street Cautious
It is not only forex brokers that felt a move yesterday. Trading on Wall Street was also quiet toward the end of the day and into early morning pre-market trading on Tuesday. This comes as traders digest the impact of rising Treasury yields and what it may signal. The 10-Year yield rose above 1.5% yesterday to claim its highest point since June.
Though the NASDAQ lost ground in the trading session yesterday, predominantly related to the impact of a rising yield, others managed to start the week as they had finished the last, on a more positive footing. Again, key drivers for equities today could include the Powell testimony, while the energy shortage concerns in the UK and Europe could also spill over.