The USD is little changed ahead of Fed Powell’s testimony on Capitol Hill

As the North American session starts yields are higher, stocks are lower, the USD is mixed but little changed. All the major currency pairs are within 0.22% of the closing level from yesterday. The dollar is lower vs the EUR, GBP, AUD and NZD and higher vs the JPY, CHF and CAD.

Pres. Trump made his 25% tariff on steel official. Is also looking at imposing tariffs on cars pharmaceuticals and chips and does not care if other countries retaliate. Canada and Mexico are exporters of Hence, the lower stocks and higher yields in early US trading.

Today, Fed Chair is due to testify about Semi-Annual Monetary Policy Report before the Senate Banking Committee at 10 AM (he will do the same tomorrow in front of the House). That will be the key event of the day. The FOMC kept rates unchanged at the last meeting. The statement was ambiguous about inflation. The statement changes from December to January showed:

Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlierThe unemployment rate has stabilized at a low level in the year, recent months, and labor market conditions have generally eased, and the unemployment rate has moved up but remains low.remain solid. Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated.

The last sentence, Fed Chair describes as a language thing vs a shift in the view on inflation trajectory. If there is any surprises it will probably be a nuance comment but Powell is pretty careful to his talking points.

IN a Reuters Poll a survey of economist released late yesterday showed:

• .Fed Rate Cut Delay: Economists now expect the U.S. Federal Reserve to hold off on rate cuts until at least the next quarter due to inflation concerns.
• Revised Forecasts: Many who previously predicted a March cut have pushed back their expectations, with most now seeing a cut by June.
• Survey Results: Of 101 economists surveyed:
  • 22 expect a cut in March
  • 45 anticipate a cut in Q2
  • 17 see a cut in the second half of 2025
  • 16 expect no cuts in 2025
• Inflation Risks & Tariffs: Since Trump’s re-election, inflation forecasts have risen, with tariffs seen as a major factor. Over 90% of economists in the survey raised their 2025 inflation estimates.
• Fed’s Caution: After 100 basis points of cuts last year, Fed officials, citing a strong job market and consumer spending, see no urgent need for further rate reductions.

Also on the speaker calendar today:

• Cleveland Fed Pres. Beth Hammack is scheduled to speak at 8;50 AM ET
• NY Fed Pres. Williams and Fed Bowman are bot scheduled to speak at 3:30 PM ET

In the UK, BOE Governor Mann will be speaking at 12: 30 PM ET. Mann voted for 50 bp cut at last week’s meeting where the BOE cut rates by 25 bps. She already spoke earlier today saying that UK inflation is becoming less of a threat as corporate pricing power weakens. She now sees pricing aligning closely with the 2% target in the coming year. Mann also noted that demand conditions have weakened more than previously expected, leading her to revise her outlook on inflation risks..

US stocks closed higher yesterday with the Nasdaq leading with a gain of just under 1%:

• Dow industrial average rose by 167.01 points or -0.38% at 44,470.41
• S&P index rose 40.45 points or 0.67% at 6066.44
• NASDAQ index rose 190.87 points or 0.98% at 19714.27
• Russell 2000 rose 8.27 points or 0.36% at 2287.93

Today, the indices are trading lower:

• Dow industrial average -80 points
• S&P index down – -14.94 points
• Nasdaq index down -88.23 points

European major indices are trading marginally higher inthe US morning snapshot showing:

• German DAX, +0.26
• France’s CAC +0.13%
• UK’s FTSE 100 +0.04%
• Spain’s Ibex +0.32%
• Italy’s FTSE MIB +0.25%

In the US debt market, the yields are higher on inflation concerns from tariffs

• 2-year yield, 4.289%, +2.2 basis points
• 5-year yield 4.369%, +3.7 basis points
• 10-year yield 4.533%, +3.8 basis points
• 30-year yield 4.748%, +3.7 basis points

At 1 PM, the US treasury will auction three-year notes to start their coupon auctions this week which will include 10 year and 30 year notes on Wednesday and Thursday.

Looking at other markets to start the trading day:

• Crude oil is trading up $0.94 or 1.3% at $73.35
• Gold is trading lower today after reaching a new all-time high earlier today at $2942.71, but backing off. The price is trading near session at $2883.96 down -$21.70 or -0.73%
• Slver is trading down $0.65 or -2.04% at $31.37
• Bitcoin is trading up $236 at $97,708

This article was written by Greg Michalowski at www.forexlive.com.