On Wednesday March 08 Jerome Powell will give his semi-annual monetary policy testimony to the House Financial Services Committee.
This testimony is known as the ‘Humphrey-Hawkins’ testimony and it is a bi-annual report given to congress.
The testimony is a major focus right now as Powell will talk about the path of US interest rates. Now, since the very strong NFP report on February 03, expectations have been growing for a more hawkish Fed and STIR markets now see a peak rate of around 5.5%. So, will Powell give clues as to how high interest rates will go? Will Powell hint at a peak over 6%.
After such hawkish expectations the best opportunity would likely come from Powell if he talks up the latest disinflationary moves and sees greater chances of a soft landing. Any signs/hints of a fed peak soon approaching would also lift stocks.
If Powell does take a more dovish approach then that would be in keeping with the reaction in the S&P500 over the last 15 years. Over 29 testimony’s the S&P500 has tended to gain into and out of the meeting.
If Powell is perceived as dovish at 1500UK time and 1000 ET then watch for some S&P500 gains out of the testimony speech.
Major Trade Risks:
The major trade risk here is if Powell is more hawkish and hints at peak rates coming in at over 6%
Remember, don’t just trade it, but Seasonax it!