Powell's Testimony Fuels the Dollar

Daily Update - 28th February 2018

Yesterday’s Market

• EUR Industrial Confidence, Economic Sentiment Indicator, Harmonised Index of Consumer Prices
• USD FED’s Powell Speech, Durable Goods Orders & Housing Data

Yesterday Explained

FED Chairman Jerome Powell made his first public appearance, testifying on the Semiannual Monetary Policy Report before the House Financial Services Committee, and handled it extremely well. His positive comments on the US economy fueled the Greenback while all major currencies weakened against the dollar.

He reaffirmed that the FED is heading in to normalization, backed by solid economic data despite inflation. Powell mentioned that he is confident about the improving economy while expressing confidence that the inflation will rise. Powell managed to strike a balance between conveying satisfaction about the economy and stressing a gradual path of rate hikes.

On the data front except for German Consumer Price index, all euro zone data was positive. However, a strong testimony from Powell meant that Euro could not gain any strength. In terms of Pound Brexit jitters coupled with a strong Dollar performance meant it also had to give away past weeks gains. US data were all but negative, yet Powell’s confidence in the economy overshadowed any negativity shown in the reports as the dollar emerged as the winner.

Today’s market

• GBP Gfk Consumer Confidence
• EUR Gfk Consumer Confidence, Unemployment Change & Rate, Consumer Price Index
• USD GDP Annualized, Inflation Data & Pending Home Sales

Today’s Focus

Another busy day follows with key reports from Euro zone and USA. Early morning, we will see the release of Gfk consumer confidence from UK, which measures the level of consumer confidence in economic activity in UK. The same report will be released from Germany around mid-day. Then comes the release of Unemployment Change and Unemployment Rate from Germany which measures number of unemployed people in Germany. This will be followed by Inflation from whole Euro zone which captures the movements in the price of goods and services. This report will be closely monitored by investors to get hints on future rate hikes.

Then the focus shifts to US with the release of GDP Annualized report which shows the monetary value of all the goods and services. Then comes the release of Core personal consumption which is the average of the amount of money the consumers spend in a month on durable goods, consumer products, and services. The day will end with Pending Home sales which captures the trends in the residential housing market activities.