Financial markets quietened down a bit after Jerome Powell’s speech to Congress yesterday

June 23, 2021

The central bank is monitoring inflation but is in no hurry to raise interest rates. That’s the bottom line from yesterday’s speech by the chairman of the US Federal Reserve to Congress. It should be noted that the Federal Reserve is guided by the Phillips curve, which illustrates the relationship between the rate of inflation and the rate of unemployment. If the unemployment rate rises, the inflation rate will also be high. Once the labor market data turn out to be positive and the unemployment rate falls, inflation will also follow a downward trend. For this reason, fundamentally, inflation has temporary nature. At the end of the day, the US stock indices closed in a positive zone, while the NASDAQ tech index hit a new all-time high.

European stocks were mostly rising on Tuesday. Investors closely followed Powell’s testimony and after the speech, when it became clear that the soft monetary policy is still in force, the euro and the British pound currency futures quotes started to rise. A lot of macroeconomic statistics in Europe are expected to be released today.

The pause in the negotiations on the Iran nuclear deal has a favorable effect on the growth of oil prices, which are at a 2-year high. With continued fuel shortages, the uptrend in oil will continue.

Powell’s comments halted the rise in the dollar index and lowered the US Treasury yields, which is positive for gold and silver. Gold is now trading in a range, but analysts are confident that as soon as the dollar index starts to fall back to previous levels, the uptrend in the precious metals will resume.

Asian stock indexes also rose on Tuesday. Japan’s Nikkei 225 increased by 1.3%, China’s CSI 300 added 0.35% and Australia’s ASX200 jumped by 2%. The situation in the Asia-Pacific countries remains the same.

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Main market quotes:

S&P 500 (F) 4,246.44 +21.65 (+0.51%)

Dow Jones 33,945.58 +68.61 (+0.20%)

DAX 15,636.33 +33.09 (+0.21%)

FTSE 100 7,090.01 +27.72 (+0.39%)

USD Index 91.74 -0.16 (-0.18%)

Important events:

– France Manufacturing PMI (m/m) at 10:15 (GMT+3);
– Germany Manufacturing PMI (m/m) at 10:30 (GMT+3);
– Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
– UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
– UK Service PMI (m/m) at 11:30 (GMT+3);
– Canada Retail Sales (m/m) at 15:30 (GMT+3);
– US Manufacturing PMI (m/m) at 16:45 (GMT+3);
– US Service PMI (m/m) at 16:45 (GMT+3);
– US New Home Sales (m/m) at 17:00 (GMT+3);
– US Crude Oil Inventories (w/w) at 17:30 (GMT+3).

by JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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Financial markets quietened down a bit after Jerome Powell’s speech to Congress yesterday