US Open Note – Powell’s hawkish transition unable to boost the dollar

Powell signals faster tapering

Global markets were struck by Fed Chair Jerome Powell’s hawkish tone during his testimony before the Senate Banking Committee on Tuesday. Powell stated that inflation could no longer be characterized as transitory, indicating that his central bank will consider speeding up its tapering process during the upcoming FOMC meeting in December. Terminating the Quantitative Easing programme faster than planned could be interpreted as an early rate hike signal since the Fed has made clear that it would like to end its bond buying programme before raising rates.

The 10-year US Treasury yield soared after Powell’s remarks but soon surrendered those gains, with the greenback also being unable to hold on to its early testimony-related gains. On Wednesday, the US dollar remained relatively unchanged against a basket of currencies at 96.02.

In the rest of the FX arena, the euro has suffered losses against the dollar and sterling at the time of writing, as pandemic-related risks are casting a darker shadow over the continent. The common currency ticked 0.18% lower against the greenback to $1.1322, while versus sterling, the euro fell by 0.33%. Commodity-linked currencies enjoyed  a strong rebound on Wednesday, with the aussie rising by 0.32% against the dollar to 0.7151, while the greenback fell by 0.25% against the loonie.

US stocks are back in the green

On Tuesday, major US indices finished firmly lower as panic-selling gripped global markets amid perceived hawkish comments from the Fed’s Chair and elevated pandemic anxiety due to the Omicron variant. Therefore, market participants could witness further volatility over the coming month as investors will be closing their books for the year, amplifying market moves.

US stocks are headed for opening gains on Wednesday, as the latest Covid-19 variant doesn't look enough right now to derail the ongoing recovery process. The S&P 500 and Dow Jones futures rose by 1.31% and 0.95%, respectively. Likewise, the tech-heavy Nasdaq 100 is set to gain 1.44% at the opening bell.

In the commodity market, WTI crude oil surged by 3.55% as traders may have exaggerated the possible impact of the latest variant on oil demand. Meanwhile, gold inched higher by 0.80%, mirroring the improvement in risk appetite.

Salesforce share price tumbles

Salesforce’s share price is down by over 6% in pre-market trade after the software company’s guidance came short of expectations despite reporting strong earnings. GAP was the S&P 500 index’s worst performer during yesterday’s trading session, as its share price tumbled by 7.13%. The clothing retailer came under pressure after settling with the US Department of Justice, following claims that it had breached a discrimination law.

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