Good morning,

So yesterday there were expectations for a speech that the FED’s chairman Jerome Powell had scheduled with the Peterson Institute for International Economics, more of an interview than a speech with a proper Q&A section at the end. And he actually disclosed some interesting point of views causing markets to move. Let’s have a look at the main points he analyzed.

  • FED thinks recovery may take time to get going, defining the current landscape the worst since WW2 even if temporary. The risk to the downside is however very high.
  • Unemployment should peak soon, probably next month, but it’s likely remaining at much higher levels that the ones of 2018 – 2019
  • He reiterated that the FED will use its full kit of tools for stimulating the economy but probably more fiscal stimulus is needed as well.

Previous 3 points had the effect of sending futures down.

Against the consistent rumors that the CB will implement Negative Interest Rates at some point, he energetically denied this info (using the adverb ‘currently’) as this could imply political effects and there’s no clear evidence on output and results of such a monetary move. MARKETS DON’T BELIEVE HIM.

FED FUNDS Futures showing bets on NIR from MAR 2021

However, this sent USD Higher.  
U$ Index, 15 mins

  • Finally, he underlined that FED will keep using Credit Facilities instead (more money in the system) with a special focus to programs that should reach main street companies: these tools have shown to work fine according to the chairman

This sent GOLD Higher.
GOLD 15 mins

This has been the most interesting event not only of the day but also of the week. Take an eye on Gold as it looks like it could break to the upside soon.
Australian Employment data was out last night, with almost 600k jobs lost in April.

Trade safe.

Marco Turatti
Technical Analyst

TIO Staff

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