Federal Reserve Chair Jerome Powell delivered his semi-annual testimony to Congress, providing insights into the central bank's monetary policy outlook. Powell indicated that the labour market has cooled considerably and appears to be back in balance, stating that the U.S. is no longer an overheated economy. He emphasised the importance of achieving price stability and reiterated the need for more good inflation data before considering policy changes. Powell noted that the Fed now faces two-sided risks, acknowledging that easing policy too soon could harm inflation progress, while easing too late could disproportionately weaken economic activity. He stressed the Fed's commitment to data-based decision-making and maintaining independence in rate-setting.
EQUITY
Goldman Sachs Group and Intercontinental Exchange ended at all-time highs, with several other banks and finance companies in the S&P 500 closing at their highest prices in at least a year. Major banks like JPMorgan, Citigroup, and Bank of America are scheduled to report their spring-quarter earnings on Friday. Analysts expect S&P 500 companies to report an average of 10.1% growth in aggregate earnings per share for the second quarter, up from 8.2% in the first quarter.
GOLD
Gold prices are potentially running for a medium-term bullish uptrend based on price and the U.S. 10-year Treasury real yield. A lower Treasury real yield is expected, suggesting a lower opportunity cost for holding gold. Currently, gold is trading in a narrow range in the Asian session ahead of U.S. inflation data. Meanwhile, globally physically backed gold exchange-traded funds have seen consecutive months of inflows, particularly in Europe and Asia, which are currently described as excessive buying at a price above normal trading range.
OIL
Oil prices fell after Hurricane Beryl's extensive power outages in Texas, affecting over 1.8 million accounts. Brent and WTI crude futures dropped, continuing recent downward trends as the summer travel season has ended as well. U.S. oil inventories showed a larger-than-expected draw, indicating steady fuel demand while traders now focused on upcoming Chinese economic data for demand insights.
CURRENCY
The dollar closed higher on Tuesday after Fed Chair Powell's testimony, which offered no clear signals on rate cuts while staying hawkish. The New Zealand dollar fell sharply after the RBNZ's dovish stance, while the Japanese yen and Chinese yuan struggled with mixed inflation data. Traders still expect a September rate cut, but Thursday's US CPI data is now in focus.
