• Fed nominee Jerome Powell testifies before Senate
  • Powell: “case for December rate hike is coming together”
  • Gold remains near 6-week high

Jerome Powell has begun his highly anticipated testimony before a Senate select committee. The nominee for the next Fed chair has not made any major surprises during his opening remarks or the subsequent Q&A sessions. Selected lines from the opening statement are as follows:

  • Expects interest rates to rise “somewhat further”
  • Pledges to respond decisively to any new economic threats
  • Cites need to retain flexibility in setting policy

Overall, this is pretty standard and unspectacular and in keeping with what most market participants expected. The comments were released ahead of the speech and therefore the markets were more focused on the Q&A session to throw up some surprises. Below are selected quotes from the Q&A session:

  • Balance sheet should shrink to final size in 3-4 years
  • Expects final size to be $2.5-3.0 trillion
  • Strongly committed to independent Fed
  • We don’t see wages signaling a tight economy
  • Case for December hike coming together

 Again there has not been anything major here with the tone fairly balanced as you would expect. There is a bit of a case to be made that it errs on the dovish side with the wages comment and with the December hike pretty much entirely baked in to the market the cautious nature of that statement passed up an opportunity to be overtly hawkish. 

The USD remains higher on the day following the earlier beat in consumer confidence with little reaction seen to Powell’s comments. Gold had some sharp selling seen around the Wall Street open but the precious metal has since recovered and trades back flat on the day. 

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 Gold has recovered its earlier drop and trades close to a 6-week high. Source: xStation

From a daily chart perspective the market is probing its highest level since mid-October and trades just shy of 1300. The 8 and 21 EMAs are in a bullish orientation (8 above 21) and the market is looking to make a move higher. The last two times these EMAs have crossed there has been a sustained move that has lasted for several weeks. 

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 The 8 and 21 EMAs indicate the market is in an uptrend. Source: xStation