Fed on Track for More Rate Hikes

Powell appeared before the Congress and made his first testimony as the chair. He was expected to comment on the monetary report being sent to the Congress by the Federal Reserve twice every year. The markets also awaited any hints from the new Fed chair regarding his stance on the economic growth and outlook of the country. This was expected to determine whether Powell is on the same page as Janet Yellen.

While the Federal Open Market Committee meeting minutes revealed that the central bank is still on track in regards to their rate hikes this year, the market were concerned of his stand regarding the economy prior to his testimony.

On his testimony, Powell stated that the economic performance of the United States in the past couple of weeks have led to the central bank’s initial plans to push an interest rate hike at a much faster rate than anticipated.

According to Powell, the central bank will be trying to balance stronger growth along with the possibility of the economy overheating in the middle of a fiscal policy that is becoming more stimulative. This was also due to the growing federal spending as well as the U.S. tax overhaul.

U.S. Dollar

The greenback traded to its highest level since last January 19 after Powell’s first congressional testimony. The U.S. dollar index traded near a five-week high as it traded 0.15% higher against six other major currencies. Against the dollar, the euro and the British pound was lower with the EUR/USD pair down by 0.15%.

U.S. Stocks

While most stocks in Wall Street rallied during the trading session prior to Powell’s first testimony before the congress, announcement of his outlook being in alignment with the previous fed chair and in favor of the economy’s recovery pushed most U.S. stocks lower during the most recent trading session.

Shares in the United States have been trading on a volatile position in the past month on the back of market concerns regarding the inflation although some stocks have recovered over the past week by more than 1%.

Wall Street shares reversed its previous gains during Tuesday’s trading session after trading mostly higher during the past two trading sessions. The Dow Jones Industrial Average inched 1.2% lower to end at 25,410.03 while the tech-heavy Nasdaq Composite Index edged 1.2% lower to close at 7,330.35. The Dow Jones which was down by almost 300 points was weighed down also by the losses of stocks such as Home Depot and Disney.

Stocks in the U.S. are expected to go down further as the Fed gives more signs of an incoming rate hike along with the continuity of the current economic performance which includes being supported by the U.S. tax overhaul as well as the global economic growth.

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