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UK’s Claimant Data Surprised Investors, Jerome Powell’s Testimony In Focus

UK’s Claimant Data Surprised Investors, Jerome Powell’s Testimony In Focus

European and US futures are trading higher as investors are bagging some bargains after the intense sell-off that we saw yesterday. There is no doubt that the fundamentals are improving, and market players are quite worried about inflation. Some of these concerns will be addressed today when the Fed Chairman will deliver his testimony. 

We also had the UK’s Claimant Count data, which came out much better than expectations. The economic number has further fuelled the rally for the Sterling. The economic number came in at -20K while the forecast was for 13.8K.   

In terms of sectors, it is the Big Tech mainly under fire, which is triggering the sell-off for the Nasdaq index. The index is trading near its 50-day SMA on the daily; a critical price point because if it moves below this average, we are likely to see more sell-off. Banking and airline stocks have been performing really well for the last few days, and the tourist sector is still one of those sectors which is still very much underwater, and there is plenty of room left for the price to recover its losses.  

Jerome Powell’s Testimony

All eyes will be on Jerome Powell’s semi-annual testimony, which is taking place today. The Fed chairman, Jerome Powell, is expected to maintain a cautious approach to the US economy. He is likely to say that the path to economic recovery is still full of obstacles, and it will take some time for the US economy to recover from coronavirus. The Chairman is also likely to be optimistic about the ongoing vaccination process as this is the only hope to stop this disaster. 

Almost 1.7 million coronavirus shots are being administered every day. According to the latest figures, nearly 13% of the population have received their first shot of vaccine. There have been some setbacks in the last few days, but that was primarily due to the cold weather as supply is not the issue anymore. This is mainly because the US has ramped up the manufacturing of the coronavirus vaccine. In addition to this, The US Food and Drug Administration Department has also approved Johnson and Johnson’s single-dose vaccine.

Jerome Powell is expected to say once again that the US is in no rush to lift its interest rates anytime soon. The most important message that the Federal Reserve’s Chairman can give is that the Fed is perfectly OK to stomach some inflation in the short term–meaning even if inflation spikes from short to medium term, the Fed isn’t really going to be bothered about it.    

Therefore, we expect Jerome Powell to downplay the prospects of an increase in prices and reiterate that the Fed will remain accommodative for an extended period of time. 

Sterling and Lockdown 

In the currency market, it is all about the Sterling-dollar pair, which has been logging gains after gains for the last number of weeks. In addition to this, we had a more positive announcement from the British Prime Minister, who confirmed that the process of re-opening the economy would begin from March 8th, and non-essential shops will open from April. His tone of speaking made it clear that there is little to no appetite among the policymakers to implement another lockdown, and this was, hopefully the last lockdown. New cases in the UK have fallen to 9.8K from its high of 68K in January. 

Of course, investors are taking this message very positively, which has pushed Sterling higher. The GBP/USD pair has claimed the 1.40 mark once again and it seems like that the path of the least resistance is skewed to the upside. 

Gold Shine Is Back 

As for the commodity market; we are experiencing decent moves in gold prices. The precious metal saw a massive bounce in its prices yesterday. The major reason behind the rise in gold prices is that traders and investors think that Joe Biden’s $1.9 trillion coronavirus relief package will further fuel inflation.