The Fed Chairman pushed markets again overnight with his summation of the latest moves in the Bond Markets. Powell noted that the economic recovery would ‘create some upward pressure on prices’, but that he could live with that over the next couple of quarters. He inferred that reactionary policy would require a ‘broader increase across the rate spectrum’. This gave the rally in Bond Yields some sustenance, which forced equities lower and sent the US Dollar surging. The EUR plunged below 1.2000, while the Yen traded 107.70, as interest rates push the US Dollar higher.
The Fed’s Beige Book was positive, with most districts experiencing moderate economic growth and rising business optimism, as the vaccine is distributed. The US Challenger Job report, revealed less job cuts than expected, ahead of the all important Non Farm Payrolls released tonight. The rising reserve forced the AUD back to 0.7725, while the NZD tests 0.7200, on the downside.
Bond Yields and the economic recovery look set to dominate the markets for the remainder of the week, with expectations high, for a strong Non Farm Payroll number. Stronger economic news is damaging the equity markets, through spiking interest rates, which is a reflection of the upside down nature of markets impacted by unnatural monetary policy pursued by Central Banks.