Markets off highs ahead of Powell testimonies
The rally in stock markets has stalled again at the start of the trading week, as last week’s jobs report continues to worry investors relying on rate cuts to sustain the rally.
Interestingly, expectations for rate cuts remain bullish, even if the odds of a 50 basis point cut this month have been dramatically pared back. We’ll have plenty of opportunities to see whether they’re justified this week, as Fed Chair Powell makes numerous appearances – along with his colleagues – and we get the minutes from the June meeting.
Fed Interest Rate Probability
I’m not convinced that investors will get the message they’re after this week, with Powell in the past having been very conservative in his interest rate rhetoric. The central bank has left the door open to cuts without committing to anything and I expect to get more of the same.
A cut in July will be difficult to dodge given current market pricing but Powell may use the opportunity to manage expectations beyond the meeting. How successful he’ll be is another thing as investors don’t appear to want to hear it and may instead continue to apply the pressure going into the September meeting.
Economic Calendar
