European Open: All quiet ahead of Powell’s testimony

Asian Indices:

• Australia's ASX 200 index rose by 36.1 points (0.49%) and currently trades at 7,364.70
• Japan's Nikkei 225 index has risen by 103.75 points (0.37%) and currently trades at 28,341.53
• Hong Kong's Hang Seng index has risen by 208.56 points (1.01%) and currently trades at 20,811.75
• China's A50 Index has fallen by -2.53 points (-0.02%) and currently trades at 13,459.77

UK and Europe:

• UK's FTSE 100 futures are currently up 19.5 points (0.25%), the cash market is currently estimated to open at 7,949.29
• Euro STOXX 50 futures are currently up 5 points (0.12%), the cash market is currently estimated to open at 4,318.78
• Germany's DAX futures are currently up 25 points (0.16%), the cash market is currently estimated to open at 15,678.58

US Futures:

• DJI futures are currently up 39 points (0.12%)
• S&P 500 futures are currently up 8.5 points (0.21%)
• Nasdaq 100 futures are currently up 43.75 points (0.36%)

• The RBA increased their overnight cash rate by 25bp in line with the consensus
• Their statement dropped references to [rate] increases, which suggests there may be one more hike to go (although this is far from certain at this point)
• AUD was the weakest currency overnight as their statement was less hawkish than the February statement
• Australia’s trade surplus narrowed as imports of cars, telecoms and industrial equipment outpaced exports
• Market mostly traded in tight ranges ahead of Jerome Powell’s highly anticipated testimony to the House
• The two-day event starts at 15:00 GMT, and continues tomorrow in front of the Senate
• SNB Chairman Jordan also speaks at 18:30 GMT, and we’re keeping an ear out for any hawkish comments given that inflation continues to overshoot expectations and the SNB’s interest rate remains relatively low at just 1%

Jerome Powell’s testimony in focus at 15:00 GMT:

We’ve had mixed comments from Fed members recently, which suggests they’re divided over whether the terminal rate needs to be increased beyond the dot plot’s central tendency of 5.1% to 5.4%. There has also been some excitement about a potential 50bp hike in March – which some members have also publicly backed – but I suspect the more likely course is 25bp increments with the potential for it to be 5.75%. So traders will want to hear any clues from Powell that indicate where rates are going and how quickly they will get there. And as high interest rates are politically unappealing, Powell could face some serious heat from the House, and how vigorously he defends high rates could guide how markets react (and how high the US dollar and yields go).

CHF/JPY daily chart:

Back on February the 13^th we successfully anticipated a breakout on CHF/JPY. Ince then, the pair has held above the 100-day EMA and 143.40/50 support zone and momentum is pointing higher. Furthermore, two bullish engulfing candles have formed and the pair looks set for an attempted breakout above 146.

Given that Switzerland’s inflation was above forecasts yet again and the SNB’s interest rate is just 1%, there’s a reasonable chance to expect some hawkish comments from SNB’s governor Jordan later today.

Today’s bias remains bullish above 144.72 (yesterday’s engulfing low) so we would welcome any low volatility pullback within yesterday’s range to seek bullish setups, in anticipation of a move to 147 (monthly R1 pivot) and the highs around 148.

Economic events up next (Times in GMT)

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge