Jerome Powell promised to do whatever was necessary to prevent sustained high inflation in the US. Powell was addressing Congress on the state of the US economy and the Fed’s view on monetary policy going forward. He confirmed that the Fed would hike interest rates, taper their asset-buying program, and reduce the balance sheet, but he did not specify the time frames, saying it could take several meetings.
The dollar fell to levels last seen in November against the euro and the pound while EM currencies also firmed. The rand traded near 15.50 levels before closing at 15.53 last night, up 0.6% on the day. A break of the 15.50 level is key to further Rand strength, and we are currently sitting at 15.51 in the early morning trade. This afternoon’s US CPI data could see some volatility in currency markets.
Commodity prices rallied yesterday with Gold up 1.16% at $1,821, Platinum up 3.4% at $972, and Palladium up 0.5% at $1,921. This morning all three metals have opened fairly flat in Far East markets. Oil rallied in New York last night as fears around Omicron’s impact on demand dissipated. Brent is trading at $83.66 and WTI at 81.28 this morning.
The DXY index fell to 95.62 as the euro climbed to 1.1365, and the pound rose to 1.3635 in the wake of Powell’s testimony. This morning the DXY is a touch lower at 95.56, with the euro firming further to 1.1375 and the pound up at 1.3643.
US Treasury yields firmed a touch to 1.73% for the 10y bond and 2.07% for the 30y bond. The recent slide in equity markets has ended with green across all markets this morning. The S&P closed 0.92% higher, the Nasdaq was 1.41% up, and the Dow ended 0.51% stronger. US futures have opened firmer this morning while the Nikkei, the Hang Seng, and the Shanghai are showing solid gains. The local ALSI ended marginally positive at 73,971 last night.