While undoubtedly obscured by impeachment hearings, Fed Chair Jay Powell is testifying before Congress on the U.S. economic outlook.
Global equity indices are a lower across the board due to a number of factors after the S&P 500 posted its 19th record high of the year, matching the same number of highs in 2018. The Dow Jones Industrial Average remarkably matched (but did not break above) its high from earlier this week. Not only did President Trump's speech stay far away from confirming reports of removing U.S. tariffs on China, but also renewed his threats towards Beijing.
The Reserve Bank of New Zealand’s surprise decision to not cut rates is also contributing to the risk-off climate, especially as Fed chair Powell will be expected to deliver the same message to Congress (no need for any more rate cuts any time soon).
Powell's testimony to lawmakers at 11 a.m. EST (text of speech released) is expected to maintain the same neutral tone he held at last month's post-FOMC press conference, but the extended Q&A period will shed light on the extent to which he is deviating away from a December rate cut. So far, the market sees no chance of a rate cut until Spring.
President Trump (and the markets) will be busy watching the first day of the hearings on his impeachment, but no urgency is expected to weigh on markets unless there is a sign that Republicans are starting to turn on their president.
One more thing regarding to China –Remarks from U.S. officials denouncing the violence in Hong Kong and backing their support for protesters may lead to a pushback from Beijing in the form of bellicose statements relating to the trade talks, especially after President Trump's renewed threat that tariffs will be “raised very substantially” if no truce was reached.
Adam Button is co-owner and managing director of ForexLive.com and a contributor at AshrafLaidi.com. You can see Ashraf’s daily analysis at www.AshrafLaidi.com and sign up for the Premium Insights. Ashraf's Tweet on indices here.
