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Market Recap – Powell’s testimony

Thursday, July 11, 2019 10:48 AM GMT

Yesterday, Jerome Powell’s testimony to the Congress reassured the markets that a rate cut is coming. The implied probability for a rate cut, as early as the 31st of July, is currently priced at 69.3%. Jerome Powell noted that weak inflation may be more persistent and reminded that since the March FOMC meeting, the FED had announced the pace decrease of balance sheet reduction (starting from May) and the end of balance sheet reduction on September.

Another incident at the Persian Gulf area hit the headlines. Three Iranian vessels attempted to impede the passage of a commercial tanker through the Strait of Hormuz. The UK's Royal Navy frigate HMS Montrose had been escorting the tanker from the rear, issued verbal warnings to the Iranian vessels, making them to turn away. Last week UK Royal Marines seized an Iranian oil tanker bound for Syria. Both incidents seem to prove that the US coalition to ensure freedom of navigation in the region, is working. Today, the monthly OPEC’s report on oil is expected to be released.

Bob Lighthizer, the US trade negotiator, is set to meet the German Economy Minister. The long dispute over US subsidizing Boeing and EU subsidizing Airbus is on the agenda. This could potentially be the first episode of an upcoming US-EU trade dispute, following the US-Chinese trade disputes.

Macro releases: Yesterday’s crude oil inventories decreased more than expected sending oil prices higher. Today the focus turns to the US inflation readings.

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