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Investors are mulling over inflation, recession, the oil market, business activity, the labor market, banks, and Powell’s rhetoric. Let’s discuss these issues in this video. The volatile American session put investors on edge yesterday. Wall Street indices closed almost flat.
The major stock indices closed yesterday with a dip. The Dow Jones and the Nasdaq closed 0.15% down. The S&P 500 shed 0.13% to close at 3,759. Wall Street indices traded in the green in the US pre-market. Nevertheless, fundamentals do not favor the steady uptrend. Wall Street is likely to continue its roller coaster today. Analysts warn about gyrations in the S&P 500 tonight. The intraday corridor for the index is defined between 3,720 and 3,800.
In essence, the stock market has been stuck in limbo. Earlier, investors wondered whether the stock market had reached its bottom and when exactly the US economy will slip into recession. Market players suggest different forecasts. Most of them assess the chance of a recession at 20-50%. Yesterday, investors were full of hopes that Jerome Powell would clear up the situation in his testimony in Congress. In practice, the Fed’s Chairman said nothing sensational but gave food for thought both for optimists and pessimists.
Powell said that the major Fed’s commitment is to tackle soaring inflation. Besides, he said that the Fed did not aim to unleash recession. He praised the domestic economy that can tolerate high interest rates.
On the minus side, Powell confessed that recession can be hardly avoided. Notably, he did not rule out a rate hike even by 100 basis points at a time.
In other words, Powell confirmed the extremely hawkish stance on inflation. Today, the Fed’s leader is giving his second testimony in front of the Financial Services Committee at the House of Representatives. He will present his evaluation of monetary policy.
As for the economic calendar, a series of PMIs for the Eurozone revealed a dismal slowdown in the business activity. PMIs for France, Germany, and the UK came in worse than expected. PMIs for the US are due later today.
The US dollar is regaining its footing. Its index is trading at nearly 104 with a bullish bias. The corridor for today is seen between 104.2 and 104.6.
The greenback owes its strength to global jitters and the Fed’s hawkishness. Apart from Powell, other policymakers are committed to the struggle against inflation. The US dollar index has grown by over 8% amid global risk aversion and as a hedge against inflation. The US dollar needs a catalyst for a new rally.
US unemployment claims fell short of expectations.
The US Labor Department reported that the number of initial jobless claims declined 2,000 last week to 229,000, whereas economists had projected a smaller score of 227,000. It proves persistent tensions in the labor market.
The USD/CAD pair is trading higher slowly but surely. The currency pair is now trading at nearly 1.2953, lacking momentum to test 1.3000. The pair is expected to trade in the corridor between 1.2940 and 1.2980.
Meanwhile, a fresh inflation record in Canada brought up the issue of more resolute measures by the Bank of Canada. Consumer prices shot to 7.7% in May, the highest level in 39 years, from 3.6% a year ago. The actual reading surpassed the consensus of a 7.4% increase. From now on, the market is anticipating a rate hike of 75 basis points on July 15 following an increase by 50 basis points in June. Upbeat employment data and retail sales raise the chance of aggressive monetary tightening. Despite such prospects, the loonie is weighed down by falling oil prices. Crude oil is extending its downtrend today, having lost almost 9% in the last 5 days. Despite a minor growth of oil prices, this is not enough to support the Canadian dollar.
The crypto market is trading sideways today, though with high volatility. Bitcoin is gyrating between 19,700 and 21,400. At the time of recording this video, the digital token was trading at around 20,500, making efforts to climb and settle above 21,000.

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