Hawkish Fed Chair Testimony pressures gold prices

In his testimony yesterday, Fed Chair Jerome Powell said he would not take any specific magnitude of rate hike "off the table" as the central bank attempts to limit inflation. Powell did not rule out a rate increase of 100 basis points. A smooth landing for the American economy, he added, will be difficult. Markets saw the comments as being more hawkish than anticipated, and gold prices dropped from 1845 dollars right before the session began to 1830 thereafter. On the other hand, dollar bulls are still awaiting additional confirmation from today's testimony.

Key Factors for Today

• Asia-Pacific markets slightly outperformed Wall Street
• US inflation expectations slide to a new four-month low of 2.54%
• According to payroll business data, the US labour market is strengthening.
• Fears that the economy may be destined for a hard landing caused the S&P 500 to dip.

Coming Up

• UK PMI numbers
• US Initial Jobless claims
• Crude Oil inventories
• Fed Chair Jerome Powell Testifies for the second day

Inflation concerns and recession risks control risk sentiment

On Thursday, Asian equities shook and commodity prices dropped as general investor confidence remained unstable due to growing concerns about the possibility of a worldwide recession and the Federal Reserve's rapid rate hikes. In testimony to the U.S. Senate Banking Committee, Fed Chair Jerome Powell conceded that a recession was "definitely a possibility," but said the Fed was not seeking to create one. This caused the dollar and U.S. Treasury yields to drop overnight.

Oil down to lowest levels in a month, Treasury yields eases

Commodity prices have been devastated by worries about the demand forecast, with oil plunging to its lowest point on Thursday in more than a month. U.S. crude fell 2.3% to $103.75 per barrel while Brent crude fell 2% to $109.49 per barrel. The yield on benchmark 10-year Treasury notes was marginally lower in early trade than at the previous day's U.S. finish of 3.15%, the lowest in almost two weeks

Powell’s comments drag equities lower

After choppy trading on Wednesday, the major Wall Street indices ended with slight losses as investors digested Federal Reserve Chair Jerome Powell's remarks on the goal of the central bank to reduce inflation. Powell stated that the Fed is "deeply committed" to bringing down the 40-year high inflation rate while not intentionally aiming to trigger a recession. 

The Nasdaq Composite sank 16.22 points, or 0.15%, to 11,053.08 while the Dow Jones Industrial Average dropped 47.12 points, or 0.15%, to 30,483.13 and the S&P 500 dropped 4.9 points, or 0.13 percent.

A US legislator makes the case for a ‘digital dollar’

Jim Himes, a member of the House of Representatives, has published a proposal that aims to open up discussion about the possibility of the United States introducing a central bank digital currency (CBDC). Himes encouraged Congress to start looking into the introduction of a digital dollar printed by the Federal Reserve in a white paper published on Wednesday in order to keep up with advancements in financial technology. A central bank digital currency "should not be conceived of as replacing existing payment methods and currencies but as an extra alternative for consumers and businesses," according to the US legislator.