Fed Chairman Jerome Powell reaffirmed their accommodative policy stance in his testimony before Congress, stating that interest rates will remain low and that they will continue to buy bonds. He said that the rise of some of the US treasury yields could be seen as a “statement of confidence” in the economy. He noted that inflation and unemployment were still some distance from their targets. Risky assets bounced in the wake of his comments, with EM currencies firming strongly. The Rand closed just under 1.0% stronger at R14.54 but has slipped a bit this morning, currently trading at R14.58 in Asia. Surprising to see the ZAR continue to trade on the front foot, as foreigners have continuously been sellers of local bonds during Feb. Traders will be keeping a close eye on Tito’s budget presentation today. We can perhaps see some volatility in the ZAR after 2 pm if the budget does not go as planned.
Copper is still up near decade highs, with fundamentally the market still focusing on hopes of a strong economic recovery driven by global Central Bank and government stimulus coupled with tight supply conditions. Precious metal prices closed lower yesterday but are trading a touch firmer this morning. Gold is at $1,809, and we will need to watch the rise in bond yields to see if there will be a sell off in gold again. Platinum is trading at $1,253, and Palladium at $2,365. Oil has slipped off its best levels, with WTI at $61.13 and Brent at $65.02.
The DXY is holding just above 90.000 this morning, with the Euro unchanged at 1.2145 and the Pound up at 1.4158. The Pound is benefitting from the vaccine roll-out and the easing of the pandemic restrictions. The Aussie and Kiwi currencies are both trading firmer this morning as risk appetite returns. The 10y US Treasury yield is a touch lower at 1.342% and the 30y at 2.181%. The S&P500 and Dow closed slightly higher, but the Nasdaq lost 0.5%. US futures, along with Asian-Pacific stocks, are all trading negative this morning.