Quiet end to the week

It may be a relatively quiet end to the week as traders digest the last two days of Powell’s testimony and US data and weigh up the prospects for interest rates this year.

Powell’s appearance Wednesday was extremely well received, with the Fed Chairman giving us as dovish a message as he was ever likely to. There was no attempt to discourage investors from fully pricing in a July cut so that looks as close to a certainty as you can expect to see.

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Investors appear encouraged that it won’t be the last as well, with his gloomier assessment of the outlook appearing an indication of future cuts. The CPI numbers on Thursday added a layer of confusion, as weak price pressures are one of the primary factors supporting calls for cuts. A core annual inflation reading of 2.1% may well leave people wondering whether inflation is as lacking as Powell indicated and the Fed’s preferred PCE measure suggests.

Stocks ended the day higher on Thursday and Europe is slightly in positive territory at the open but the data yesterday did take some of the wind out of the sails. This may put more emphasis on the PPI data today but broadly speaking it’s looking a little thin. Thankfully, Monday marks the start of earnings season so we won’t have to wait long for something to get our teeth into.

Cryptocurrencies are Trump’s latest bugbear

Trump’s attack on Libra and cryptocurrencies as a whole didn’t have as great an impact on the space as you might have typically expected. The President declared he’s not a fan, insisting they are not money and that Facebook and others would need a banking charter and become subject to all regulations. In ending the attack by lauding the dollar’s dependability and dominance, it makes you wonder whether the President is feeling a little threatened by Facebook’s foray into the space.

The President’s tweets were enough to sink bitcoin by around $500 over the next couple of hours but by its own standards, this is a rather mild response. It has also since halved that deficit so the initial response – granted not at the busiest time of the day – has been fairly muted. It will be interesting to see if traders respond more over the course of today, especially if this turns out not to be a one-off attack.

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