Federal Reserve Chair Jerome Powell stated in testimony last Wednesday that the fight to lower inflation back to its 2% target still has a long way to go. While inflation has moderated since last year, it remains high, and the process of bringing it down to the target is slow and painful for some sectors. The Federal Reserve is expected to resume interest rate increases in July, but doubts exist about further increases. Powell emphasised the need to balance the strength of the labour market and economic growth with the impact of rate increases, especially in banking. The recent decision not to raise rates was seen as a prudent step to take a step back and gather more information before making further moves. Rapid rises in interest have seen multiple banks collapse, even one with huge assets backing it.

EQUITY

Stocks closed lower as investors remained cautious following remarks from Federal Reserve Chairman Jerome Powell suggesting further interest rate hikes. Powell stated that if inflation continues to exceed the target, the Fed's projection of two rate hikes this year is likely. Amazon was sued by the FTC over its Prime program, while Tesla fell on a stock downgrade after a cool 5-week rally.

GOLD

Gold prices were steady after four days of losses on hawkish Fed policy that strengthened dollar expectations. Traders remained cautious about investing in gold due to this uncertainty. The recent comments by Fed Chair Jerome Powell on potential rate hikes to control inflation briefly caused gold prices to fall.

OIL

The recent rise in crude markets was driven by interest rate cuts in China and expectations of tighter oil supplies. Although U.S. oil inventories declined more than expected, gasoline inventories were expected to have increased for the third consecutive week. Stimulus in China was hoped to recover demand in the region, although economic data does not seem positive yet.

CURRENCY

Fed Chair Jerome Powell reaffirmed the bank's hawkish stance but did not explicitly indicate an interest rate increase in July, contradicting other Fed members who called for a pause to assess the impact of recent policy tightening. The dollar weakened due to the conflicting messages, but Asian currencies failed to capitalise on this weakness, while the Australian dollar faced additional pressure from uncertainty surrounding Chinese stimulus measures and commodity demand.