European Open: Currencies tread water ahead of Jerome Powell speech

Asian Indices:

Australia's ASX 200 index fell by -34.9 points (-0.46%) and currently trades at 7,504.10
Japan's Nikkei 225 index has fallen by -9.28 points (-0.03%) and currently trades at 27,684.37
Hong Kong's Hang Seng index has risen by 140.98 points (0.66%) and currently trades at 21,363.14
China's A50 Index has risen by 6.86 points (0.05%) and currently trades at 13,549.52

UK and Europe:

UK's FTSE 100 futures are currently up 6 points (0.08%), the cash market is currently estimated to open at 7,842.71
Euro STOXX 50 futures are currently up 6 points (0.14%), the cash market is currently estimated to open at 4,211.45
Germany's DAX futures are currently up 11 points (0.07%), the cash market is currently estimated to open at 15,356.91

US Futures:

DJI futures are currently up 12 points (0.04%)
S&P 500 futures are currently up 22.5 points (0.18%)
Nasdaq 100 futures are currently up 5 points (0.12%)

Earnings:

UK earnings: BMO – Carlsberg, BP

* BMO = Before market open, DMH = During market hours, AMC = After market close, TNS = Time not specified

Jerome Powell’s speech will be a main focus at 17:40 GMT, given the strong employment report on Friday and hawkish comments from Bostic. The Fed have a strong tendency to try and (re)shape market expectations following their meetings, when they feel their message has been misconstrued.

Given money markets initially lowered the Fed’s anticipated terminal rate to 5% and begin pricing in two cuts this year, there’s a decent chance Powell will strike a hawkish tone today.

Yesterday, the Fed’s Bostic told Bloomberg that he thinks the Fed may need to raise rates higher than the Fed anticipated and keep them higher for longer. This could suggest he anticipates rates to be 5.5% or greater and aims to remove expectations of rate cuts this year.

BOE’s Ramsden Pill speak at 09:00 and 10:15 respectively at the Royal Economic Society for Women, the Cunliffe speaks about digital currencies at 15:00
The BOC’s Govenor Macklem speaks on “how monetary policy works” at 17:45
The RBA hiked rates by 25bp to a 10-year high of 3.35% (and indicated more hikes are to follow)
The US dollar was the weakest major currency overnight, but the low levels of volatility show support for the dollar ahead of Jerome Powell’s speech

USD/JPY 4-hour chart

USD/JPY has pulled back slightly from its 20-day high having met resistance at the 50-day EMA. With Jerome Powell’s speech in full focus, it can be the difference between USD/JPY rallying or falling from current levels. Ultimately, traders will want to hear a hawkish message that supports the post-NFP rally, otherwise its vulnerable to some profit taking. For now, pullbacks towards gap support 200-bar EMA could tempt bears to return to the table, whilst a break below 131 suggests the trend has reversed on this timeframe.

Economic events up next (Times in GMT)

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