Marketmind: It’s Jay time! | Reuters


A look at the day ahead from Karin Strohecker

FILE PHOTO: Federal Reserve Chairman Jerome Powell testifies before the Senate Banking Committee hearing on Capitol Hill in Washington, USA, December 1, 2020. Susan Walsh / Pool via REUTERS

After data showing the biggest rise in consumer prices in the United States in 13 years, we hear what Fed Chief Jay Powell has to say about it when he kicks off his two-day testimony on Capitol Hill later. Wednesday.

Inflation in the world’s largest economy, which accelerates for a third consecutive month, silenced the rally in equities, just as equities made a comeback after navigating bond market volatility last week.

Powell will be faced with questions about how transient price pressures might be and how quickly the Fed might need to withdraw the monetary support that has been critical to the markets.

Wednesday’s numbers prompted markets to advance the timing of the Fed’s first rate hike, bets that took the dollar to a three-month high against the euro and a one-week high against the yen.

An additional complication was weak demand at Wednesday’s 30-year Treasury bond auction, which pushed 10-year yields above 1.4%. And after a softer Wall Street close, Asian stocks fell while European and US markets are expected to open lower.

Price pressures are also a hot topic elsewhere, with data showing UK inflation still exceeds the Bank of England’s target, hitting 2.5%.

Meanwhile, some central banks are pushing ahead with stimulus withdrawal plans – New Zealand has announced the end of its quantitative easing program linked to the pandemic. Bets on a rate hike this year caused the Kiwi dollar to jump 1%.

Later today, the Bank of Canada is also expected to announce its intention to gradually reduce asset purchases.

Key developments that should provide more direction to the markets on Wednesday:

-British inflation jumps to 2.5% in June

-Bank of Canada should decline

-New Zealand bank ends bond purchases and paves way for possible rate hikes

-Meetings of the central banks of Turkey, Chile and Croatia

-WPI inflation in India

– Swedish IPC

-Industrial production in the euro zone

-ECB board member Isabel Schnabel speaks

-Bank of England Deputy Governor Dave Ramsden speaks

-Auctions: German Bund at 10 years

-Revenues: Citi, BofA, BlackRock, Wells Fargo, Delta Airlines

Chart: Inflation in the United States –

Reporting by Karin Strohecker; edited by Sujata Rao

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