Powell: Inflation is in the very early stages of easing

　　

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Federal Reserve Chairman Bill Powell said Tuesday that inflation is in the very early stages of easing, which may be a long process, the process may be bumpy, and must keep interest rates at restrictive levels for some time. In the job market, Bauer said that if the strong employment data continues, further interest rate increases will be needed to cool inflation, and borrowing costs may have to reach a peak higher than previously estimated by the Fed.

The Fed’s inflation target is 2%, but several indicators show that the inflation rate is much higher than this target. The U.S. non-farm payrolls report for January released last week showed that 517,000 people were added to the workforce, far exceeding the market’s expectations of 185,000, and the unemployment rate also set a new 53-year low of 3.4%.

Dow ends higher as Powell offers limited new clues on policy. The Dow Jones Industrial Average gained 0.78% or 265 points, the S&P 500 rose 1.3%, and the Nasdaq jumped 1.9%.

On the other hand, the U.S. 10-year bond yield surged to 3.66% and the U.S. Dollar Index rose to 103.53. The U.S. Dollar Index was nearing 104 before Bauer’s remarks, setting a new high for the second day in a row since Jan. 6 and rising more than 0.3% during the day.

Main Pairs Movement

The US dollar retreated lower on Tuesday, extending its February rally throughout the first half of the day but failed to preserve upside traction amid mixed comments from the Federal Reserve (Fed) officials. Fed Chairman Jerome Powell said that he expects 2023 to be a year of significant declines in inflation and added that the central bank would certainly raise rates more if data were to continue to come in stronger than expected. Therefore, the US Dollar fell as Wall Street soared as an immediate reaction.

GBP/USD advanced higher on Tuesday with a 0.24% gain after the cable regained upside strength and rebounded towards the 1.2080 mark amid the fresh optimism surrounding the UK Prime Minister Rishi Sunak’s Cabinet reshuffle. On the UK front, Sunak broke the British Cabinet into two departments to justify his pledge to bolster the economy. Meanwhile, EUR/USD was nothing changed and stabilized above 1.0720 despite hawkish Fed commentary.

Gold advanced slightly with a 0.30% gain for the day after climbing to a daily high above $1880 during the US trading session, as market sentiment stays sluggish amid mixed signals from the Federal Reserve and the geopolitical front. Meanwhile, WTI Oil advanced sharply with a 4.09% gain for the day as the US Dollar weakens on soft US Fed Powell remarks.

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Economic Data

Currency	Data	Time (GMT + 8)	Forecast
USD	Crude Oil Inventories	23:30	2.457M