Finance

Marketmind: It’s Jay time! By Reuters

© Reuters. FILE PHOTO: Federal Reserve Chairman Jerome Powell testifies before the Senate Banking Committee hearing on Capitol Hill in Washington, U.S., December 1, 2020. Susan Walsh/Pool via REUTERS

A look at the day ahead from Karin Strohecker

After data showing the biggest rise in U.S. consumer prices in 13 years, we get to hear what Fed chief Jay Powell says on the matter when he kicks off his two-day testimony on Capitol Hill later on Wednesday.

Inflation in the world’s top economy barrelling ahead for a third straight month has doused the equity rally, just as stocks were staging a come-back after navigating last week’s bond market volatility.

Powell will face questions on how transitory price pressures might be and how fast the Fed might need on withdrawing the monetary support which has been critical for markets.

Wednesday’s figures prompted markets to bring forward the timing of the Fed’s first rate hike, bets that lifted the dollar to a three-month high versus the euro and a one-week high versus the yen.

An added complication was weak demand at Wednesday’s auction of 30-year Treasury bonds, which pushed 10-year yields above 1.4%. And after a softer Wall Street close, Asian stocks fell while European and U.S. markets are tipped to open lower.

Price pressures are a hot topic elsewhere too, with data showing British inflation rising further above the Bank of England’s target, hitting 2.5%.

Some central banks, meanwhile, are going full steam ahead with stimulus withdrawal plans — New Zealand announced a halt to its pandemic-linkd QE programme. Bets on a rate hike this year have sent the dollar surging 1%.

Later in the day, the Bank of Canada is also expected to announce plans to taper asset purchases.

Key developments that should provide more direction to markets on Wednesday:

-UK inflation jumps to 2.5% in June

-Bank of Canada expected to taper

-New Zealand c.bank ends bond purchases, paves way for possible rate hikes

-Turkey, Chile and Croatia central bank meetings

-India WPI inflation

-Swedish CPI

-Euro Area Industrial Production

-ECB Board Member Isabel Schnabel speaks

-Bank of England Deputy Governor Dave Ramsden speaks

-Auctions: German 10-year Bund

-Earnings: Citi, BofA, BlackRock (NYSE:), Wells Fargo (NYSE:), Delta Airlines (NYSE:)

Graphic: U.S. Inflation – https://graphics.reuters.com/USA-STOCKS/xklvyxraapg/inflation.png

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