Gold shines, dollar retreats, Bitcoin tumbles ahead of Fed Powell’s critical speech

The market mood has improved after another down day in stocks as US yields are off the highs. Fears of inflation boost commodities and commodity currencies while Bitcoin dives in choppy trading. All eyes are on Fed Chair Powell’s testimony.

After American shares retreated again, S&P 500 futures are rising and the benchmark ten-year bond yields are below their peak of 1.40%. The US dollar is on the back foot with GBP/USD eyeing 1.41 and EUR/USD moving above 1.2150.

Commodity currencies experiencing more substantial moves, with AUD/USD topping 0.79, NZD/USD above 0.73, and USD/CAD dipping under 1.26. The loonie is benefitting from a fresh increase in oil prices, with WTI changing hands above $62 despite a recovery in US oil output, following the “deep freeze” storm.

Jerome Powell , Chairman of the Federal Reserve, is set to testify before Congress amid a dilemma – while higher bond yields represent the “reflation trade” and a return to growth, there is also a risk of overheating, as already expressed in commodity prices. Powell will try to navigate between causing fear of removing stimulus too quickly and doing too much.

Christine Lagarde, President of the European Central Bank said she “closely monitoring the evolution of longer-term nominal bond yields,” signaling the Frankfurt-based institution is ready to step in and lower returns on debt.

Gold is rising, with XAU/USD recapturing the $1,800 level. A weaker dollar and demand in India are underpinning the price of the precious metal.

Bitcoin tumbled down some $10,000 on Monday to well below $50,000 but recovered quickly. A significant liquidation was blamed for the fall, and BTC/USD has since recovered to around the $50,000 mark.

Coronavirus: Over 500,000 people have died in the US from COVID-19. The world’s richest nation has passed this grim milestone amid falling cases and hospitalizations and as vaccines are rolled out. A new study in the UK has shown that a single Pfizer/BioNTech dose provides sufficient protection from infections.

UK Prime Minister Boris Johnson laid out his reopening plan, which is considerably cautious – a five-week gap between each stage. The goal is to avoid another lockdown, making this easing irreversible. Britain’s unemployment rate rose to 5.% in January, as expected, while wage growth accelerated to 4.7% and January’s jobless claims dropped by 20,000, both better than estimates.

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