Powell Signals Rate

The dollar rose against its rivals after an overnight rally, as Federal Reserve Chairman Jay Powell gave lawmakers a positive assessment of the economy, and expects to continue raising interest rates gradually. The dollar’s move higher was also supported by a fall in both the pound and euro. Wall Street pushed higher on Tuesday as solid earnings supported expectations of a strong second-quarter reporting season and analyst expectations have grown rosier. In economic news, U.S. industrial production increased in June, led by a manufacturing rebound and mining gains, according to the Federal Reserve.

USD/JPY pair hit fresh six-month highs above the 113.00 handle, while EUR/USD and GBP/USD remained on the back foot, in the wake of monetary policy divergence and Brexit uncertainty.

There are plenty of risk events lined up for release today that may have a significant impact across the forex market. The focus in the European session is likely to be the UK CPI data – releasing at 08:30 GMT, which is expected to come in a tad firmer at 2.6%. At 09:00 GMT the Eurozone final CPI release that will confirm the flash reading of 1.0% on an annualized basis.

Moving on at 12:30 GMT, the US housing starts and building permits data will headline the NA session ahead of the Fed Chair Powell’s testimony on the semi-annual Monetary Policy Report before the House Financial Services Committee. No surprises are expected from the second round of Powell’s speech, as he is likely to reiterate yesterday’s comments on the inflation and interest rates outlook.

Crude oil prices settled modestly higher Tuesday, recovering from nearly one-month lows intraday. Currently WTI is trading at $66.67 per barrel, while Brent is at $71.79 per barrel. The rebound in WTI crude prices comes amid renewed supply disruptions in Venezuela and day after oil observers appeared to trim their bets on a global supply shortage. Today, the US Energy Information Administration (EIA) will publish its weekly crude stockpiles report that will offer fresh impetus to the oil traders at 14:30 GMT. Meanwhile, the Fed Beige book will be published at 1800 GMT.

Gold prices fell to a year low Tuesday, pressured by a rally in the greenback as Federal Reserve Chairman Jay Powell said gradual rate hikes would continue. Gold is sensitive to moves higher in both bond yields and the U.S. dollar.