Fed Chair Powell’s cautious optimism

Today's news headlines: 

‘Powell signals ‘hope for return to more normal conditions’’. Whilst speaking to Congress yesterday, Fed Chair Jerome Powell stressed that the US central bank intends to continue their heavy support of the economy and that no tightening or tapering of monetary conditions was yet expected. Powell cited downside risks to the recovery when justifying the Fed’s ultra-easy stance, but did offer one of his more optimistic assessments of economic conditions since the start of the pandemic. Powell also downplayed predictions for a sudden jump in inflation, which has hit tech stocks in recent days, commenting that it was unlikely to be sustained. (Financial Times)

‘Europe’s factories raise goods prices as supply bottlenecks bite’. Supply chain disruption, which has caused shortages of materials and soaring shipping costs, has sent Eurozone inflation to its highest level in almost a year and is unlikely to ease in the short-term. Germany’s central bank has warned that inflation could surge to 2008 financial crisis-era levels by the end of the year, with manufacturers passing on increased input costs to customers. (Financial Times)

Today's events, rates, and data 

  • Although European and US equity futures are lower this morning, market risk sentiment remains solid following the Federal Reserve’s pledge of continued monetary support to the US economy. Sterling has already moved 1.5% higher on the Greenback this week and is 1% up on the Euro, as vaccine optimism continues to drive the Pound higher against its peers.

Today's events

German Final GDP: 0.3% vs 0.1%
MPC Member Haldane Speaks: 12.00pm
UK Monetary Policy Report Hearings: 2.30pm
Fed Chair Powell Testifies: 3.00pm
FOMC Member Brainard Speaks: 3.30pm
FOMC Member Clairda Speaks: 6.00pm & 9.00pm

Interbank rates

GBP/USD: 1.4185
GBP/EUR: 1.1665
EUR/USD: 1.2165
USD/CAD: 1.2575