The Federal Reserve Chairman Powell, appeared before Congress for his second day of testimony, this time the House. He only reiterated his hawkish stance on interest rates and commitment to getting inflation below the target 2%. The focus now turns to the drivers of his hawkish sentiment and that is Friday’s Non-Farm Payroll number and the labour market. Non-Farm Payrolls are expected to add 225,000 jobs and any ‘beat’ on that number will cause markets to react aggressively. The US ADP Jobs report added 242,000 private sector jobs and JOLT’s showed more than 10 million job openings. The US Labour market remains tight and this allows the Fed more latitude. The Bank of Canada paused their interest rate hikes at 4.5%, allowing the rises to flow through into the economy and noting inflation had fallen from highs above 8% to 5.9%. The US Dollar remains well bid, with the EUR trading 1.0540, while he GBP fell back to 1.1830.
Commodity currencies are suffering the stronger reserve, with the AUD holding below 0.6600, while the NZD crumbled under 0.6100. Inflation and interest rates remain the key drivers to markets and all attention now turns to the US labour market, to test the strength of the economy and the resilience.