Powell spurs bets of 50bp cut in July

The US dollar gave back gains on a sharp move after the Federal Reserve (Fed) Governor Jerome Powell has been very clear that the global economic slowdown outweighs the encouraging data in the US at his speech before the congress on Wednesday. Powells testimony gave yet another solid sign that the Fed is preparing to cut the interest rates in July. In the wake of Powells first day of testimony, the market sees a 25-basis-point cut as largely granted. On top, the activity on the US treasury markets suggests that there are 25% chances for a 50-basis-point cut by the end of this month. This is up from nearly 5 % before Powells speech. And indeed, if Powell chose to deliver a dovish testimony on top of what has been already priced in by the markets, then he could pull out more of his hat at the July meeting. Powell will testify before the Senate Banking Committee in Washington DC today.

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Opening calls

FTSE to open 25 points higher at 7555

DAX to open 57 points higher at 12425