On Wednesday, March 8, Jerome Powell will give his semi-annual monetary policy testimony to the House Financial Services Committee. This testimony is known as the ‘Humphrey-Hawkins’ testimony and it is a bi-annual report given to congress.

The testimony is a major focus right now as Powell will talk about the path of US interest rates. Now, since the very strong NFP report on February 3, expectations have been growing for a more hawkish Fed and STIR markets now see a peak rate of around 5.5%. So, will Powell give clues as to how high-interest rates will go? Will Powell hint at a peak over 6%?

After such hawkish expectations, the best opportunity would likely come from Powell if he talks up the latest disinflationary moves and sees greater chances of a soft landing. Any signs/hints of a Fed peak soon approaching would also lift stocks. If Powell does take a more dovish approach then that would be in keeping with the reaction in the S&P500 over the last 15 years. Over 29 testimonies, the S&P500 has tended to gain into and out of the meeting. If Powell is perceived as dovish at 15:00 UK time and 10:00 ET then watch for some S&P500 gains out of the testimony speech.

Major Trade Risks: The major trade risk here is if Powell is more hawkish and hints at peak rates coming in at over 6%.

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