Markets are looking to rise after retreating amid rising yields and energy issues. The dollar is losing some ground ahead of Fed Chair Powell’s testimony. Energy shortages are gaining more traction while cryptocurrencies retreat amid regulation talk.
US 10-year Treasury yields have dropped below 1.50% after several days of rises. The upward move is related to the Federal Reserve’s taper signal last week and prospects of rising inflation, as reflected in energy prices. At the time of writing, the drop in returns on US debt allows the dollar to take a breather from its gains.
Federal Reserve Chair Jerome Powell is set to testify before Congress on Tuesday. In his already released prepared remarks, Powell stresses he would act against sustained inflation and that higher prices and hiring shortages could be more sustained than anticipated. On the other hand, he sees ongoing strong growth.
Powell is set to stress that ending bond buys does not imply imminent rate hikes, echoing comments by Fed Governor Lael Brainard. Their colleagues Michelle Bowman and Raphael Bostic are slated to speak later in the day.
Fed resignations: Boston Fed President Eric Rosengren and Dallas Fed President Robert Kaplan will step down in the next few days after revelations of active trading around the bank’s decisions. Kaplan stood out as a hawk and his departure could tilt the Fed toward a dovish stance.
Energy issues: China is struggling with cuts to power supplies in several regions, threatening to slow down the economy. Coal and other fuels used to create electricity are hard to come by. In the UK, the army has been put on standby in case it is needed to fil petrol stations, amid a dearth of lorry drivers.
Soaring natural gas prices in Britain and Europe is weighing on sentiment. WTI Crude Oil is trading above $75 while Brent has topped $80.
The Conference Board’s Consumer Confidence gauge for September is set to edge higher. It is essential to note that August’s falls in sentiment did not result in lower spending by consumers.
On Monday, the US reported better-than-expected Durable Goods Orders statistics for August, with the headline shooting higher by 1.8%.
EUR/USD is clinging to 1.17 as the dollar softens and ahead of a speech by European Central Bank President Christine Lagarde. On Monday, Lagarde rehashed her position that inflationary pressures would ease.
GBP/USD is holding onto 1.37 after Bank of England Governor Andrew Bailey repeated his position that interest rates could rise before the bond-buying scheme concludes.
Debt ceiling: Senate Republicans blocked legislation that would fund the US government. Investors continue shrugging off chances of a US default on its debt, as such debacles were resolved in the past.
Cryptocurrencies: Bitcoin is changing hands below $43,000, Ethereum under $3,000 and ADA is pressured at around $2.15. Concerns about regulation have been cited as the driver behind the most recent decline.