The US$ has strengthened, while stocks (-0.5%/-0.6%) and commodities are lower (Gold -1.2%, WTI -1.3%) following Fed chair Jerome Powell’s prepared remarks for his first Congressional testimony on Tuesday. Overall he was fairly upbeat, hinting at a more hawkish stance from the Fed while at the same time not telling us a great deal that we did not already know. He was tactful in saying that he would not prejudge what will happen but did list all the items that he feels positive about, including the better economic data, the tax cut, increasing global growth, hopes for better exports and the prospect for mildly stronger inflation. He also suggested that the upbeat outlook opens the door for a forecast adjustment (dot plot) at the March meeting while giving no hint of what that might mean to the current outlook of 3 rate hikes this year.
In terms of data today, almost forgotten in the wake of Powell’s testimony, the US trade deficit widened to US$ -74.4b in January, while the Durable Goods Orders dropped sharply by -3.7% in January (ex-transport orders dropped -0.3%). Wholesale inventories rose by 0.7% mm in January. Earlier in the session, the German CPI came in lower than expected and initiated the downside pressure on the Euro..
Wednesday will begin with the NZ Visitor Arrivals and the ANZ Activity Outlook/Business Confidence, while Australia will have the Private Sector Credit; Japan will deal with the January Industrial Production, Housing Starts, Construction Orders and Retail Trade while from China we get the NBS Mfg/Non-Mfg PMIs. Europe will then follow on with the German Consumer Confidence and the EU CPI for Feb (exp 1.2%; Core 1.1%). Finally, it will be another busy day in the US with Jerome Powell speaking once again, and the day will also include the Q4 Provisional US GDP Annualised (exp 2.5%), the Core Personal Consumption/Expenditure Prices/Index (exp 1.9%/2.8%). Oil traders will look out for the EIA weekly crude oil stock change. Have a good day.
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