Fed Chairman Jerome Powell begins his bi-annual two-day testimony on Capitol Hill this morning. While most expect the Fed to leave rates unchanged for the year, future markets are pricing in a possible rate cut for September. Chairman Powell’s remarks will hopefully give some insight to the Fed’s thoughts for the year. Chairman Powell testifies before the House today, and the Senate tomorrow. USD remains better bid this morning against the major currencies. With the exception of the Nikkei in Japan, all indices in Asia and Europe have been positive and Dow Futures are higher indicating an opening of the US equity market of around 70 points. Hasbro and Under Armor will report earnings before the opening bell, while Lyft and Western Union will report after the close.
EUR/USD is trading at its lowest level in four months as USD strength weighs on the single currency. The Euro continues to remain pressured as the US economic numbers show solid growth, while the Eurozone economy continues to struggle. Monday’s release of Consumer Confidence was lower than expected. European Central Bank President Christine Lagarde will also be testifying today as she completes 100 days as President. She is expected to report that the ECB’s strategic review should be concluded by July as opposed to year-end. Traders are expected to test support levels on the EUR and a move lower would not be surprising.
GBP/USD has bounced off of overnight lows as GDP release from Great Britain beat expectations coming in at 1.1%, better than the forecast of 0.8%, but slightly lower than the previous 1.2%. This release has given traders a moment to catch their breath, but downside momentum remains intact. Market concerns that the UK will crash out of the European Union at the end of the year will continue to weigh on the GBP until there is a trade agreement between the EU and UK in place. Bank of England Governor Mark Carney is the third central banker to testify, as he will be before the House of Lords this morning. This will be his last appearance in front of the House as he is leaving his post.
USD/JPY remains bid as traders are concerned with the Coronavirus. The Nikkei was the only equity market closing negative overnight. The January Eco Watchers Survey came in at 41.9, better than expected, but JPY pressure remains. USD/JPY looks poised to test resistance levels in the next few days as the currency pair is being influenced by better US economic figures and disappointing JPY numbers.
The Canadian Dollar moved higher in overnight trading, as Brent crude recovers from its 13-month low on Monday. Oil rose to $54 a barrel. After testing resistance levels overnight the USD/CAD is lower as trading starts today. As oil prices rise, commodity-based currencies move higher. The Canadian Dollar is also benefitting by the USD strength.
The Coronavirus death toll continues to rise as that number has gone above 1,000 but officials have stated they believe the infection rate has stabilized. With Chinese factories returning, stock markets have turned positive around the world. The vice chair of the National Institute for Finance and Development said yesterday that “researchers expect a negative impact of the virus epidemic on full-year GDP growth to be in the range of 0.2% to 1.0%.” While may have expected the virus outbreak to affect the economy, this Is the first official comments that I have seen.