The Fed Governor offered a hint that he’s in no rush to wind down the central bank’s balance sheet
Wall Street stocks erased early losses and advanced overnight as investors cheered Powell’s testimony to Congress. The Fed Governor offered a hint that he’s in no rush to wind down the central bank’s balance sheet. Powell highlighted that it could take up to four meetings to decide on the details of the plan. At the same time, he confirmed that the Fed’s tightening plans include higher interest rates to ensure high inflation did not become “entrenched.” Against this backdrop, the Dow Jones Industrial Average rose 0.51%, the S&P 500 gained 0.92%, and the Nasdaq Composite added 1.41%.
Asian equities followed Wall Street higher, aided by the persisting bullish bias in the oil market. The Shanghai Composite index gained 0.84% and the Nikkei 225 in Tokyo rose 1.9%. The Hang Seng in Hong Kong rallied 2.79% while the Kospi in Seoul added 1.54%. Of note, regional stocks edged higher even as the World Bank has cut its forecast for global economic growth this year to 4.1% from 4.3%, citing supply chain disruptions.
As risk sentiment has improved, the safe-haven dollar slipped nearly across the board after Powell’s speech. The USD index failed to regain the 96.00 figure and slipped back to the 95.60 area that capped losses last week. So if the prices struggle to hold above this critical support, the index could slip towards late-November lows around 95.60. However, later in the day, the greenback may derive some support from the US CPI report if the figures confirm the continuing rise in inflation.
Elsewhere, gold prices jumped to the $1,823 area as dollar demand waned, pushing the commodity to one-week highs. Today, the precious metal seems to be losing the upside momentum but still holds above $1,810 during the European hours. Should the greenback regain the upside bias, the XAUUSD pair may retarget the $1,800 psychological level in the near term. On the upside, the key barrier arrives at $1,830.