Jerome Powell's speech reassured investors. Fed believes that the recent spike in inflation is temporary

Yesterday, the Fed Chairman Jerome Powell pointed out that the economic situation wouldn’t allow Fed to reduce the QE program in the near future, as 7.5 million jobs weren’t provided to reach previous levels. When it comes to the rise in inflation, Mr. Powell said that the increase in prices is predetermined by the country's recovery from the pandemic and is temporary, but inflation will remain high in the coming months. This year, the Fed promises strong support to complete the US economic recovery. The US stock indices closed a trading session without a single trend on Wednesday.

Meanwhile, tensions between China and the US continue to escalate as the US announced that it has no plans to resume the economic dialogue with China that was suspended during the presidency of Donald Trump. The US Senate also passed a law banning all products from China's Xinjiang province.

The EU is targeting airlines due to a major shift in climate policy. Airlines could lose their jet fuel tax credit and may pay a larger bill for emissions. This could deal a serious blow to European airlines, which are already on the brink of survival during the quarantine period. In its turn, the European Central Bank is launching a pilot project of the "digital euro". It’s a fully electronic version of the European currency, which will differ from both the paper prototype and cryptocurrencies. The digital euro will be in the test mode for two years.

Yesterday, oil prices fell sharply as anonymous OPEC+ sources reported that the United Arab Emirates and Saudi Arabia reached an agreement on production quotas in August. There is no official confirmation of this information yet. But the oil problems are not limited to OPEC+. The rapid spread of the Delta strain of coronavirus continues to threaten the global economic recovery.

Against the background of the decrease the dollar index, the government bonds yield also decreased, which led to a rise in prices for gold and silver. While the US monetary policy remains unchanged, the fundamental picture is in favor of rising prices on precious metals.

The Asian stock market also closed a trading session without a single trend on Wednesday. South Korea's central bank kept its interest rate at a record low of 0.5%. China's GDP increased by 7.9% in the second quarter (with the forecast of 8.1%), relative to the same period last year, but the economy slowed down compared to a record jump of 18.3% in the first quarter. China's industrial production increased by 8.3% at an annual rate in June (with the forecast of 7.8%), but it’s lower than the 8.8% increase recorded in May. China's unemployment rate was unchanged and remained at the level of 5%. Indonesia is preparing for a worsening COVID-19 outbreak as the Delta strain is spreading faster than expected. Thailand reported a record number of deaths in the last 24 hours from the coronavirus.

Main market quotes:

S&P 500 (F) 4,374.30 +5.09 (+0.12%)

Dow Jones 34,933.23 +44.44 (+0.13%)

DAX 15,788.98 -0.66 (-0.01%)

FTSE 100 7,091.19 -33.53 (-0.47%)

USD Index 92.37 -0.38 (-0.41%)

• – Australia Employment Change (m/m) at 04:30 (GMT+3);
• – Australia Unemployment Rate (m/m) at 04:30 (GMT+3);
• – China GDP (q/q) at 05:00 (GMT+3);
• – China Industrial Production (m/m) at 05:00 (GMT+3);
• – China Unemployment Rate (m/m) at 05:00 (GMT+3);
• – UK Average Earnings Index (m/m) at 09:00 (GMT+3);
• – UK Claimant Count Change (m/m) at 09:00 (GMT+3);
• – UK Unemployment Rate (m/m) at 09:00 (GMT+3);
• – US Initial Job Claims (w/w) at 15:30 (GMT+3);
• – US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+3);
• – US Industrial Production (m/m) at 16:15 (GMT+3);
• – US Fed Chair Jerome Powell’s Testimony at 16:30 (GMT+3);
• – Natural Gas Storage (w/w) at 17:30 (GMT+3).

by JustMarkets, 2021.07.15

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.