SAY HELLO - Later today, we'll get to hear more from the new Fed Chair, when he testifies before the House Financial Services Committee. The event is a highly anticipated one, as the market hasn't really heard a lot from Mr. Powell and his outlook will help the market get a better idea about just how it may need to be pricing the Fed timeline, which of course, will have a big impact on the Dollar and global equities. The testimony comes at a time when it is even more interesting, now that inflation metrics have started to turn up in the US, which could very well force the Fed to adopt a more aggressive normalization.
THIS COULD BE BIGGER - So this is where we will need to be focused today, at lease initially. Why do I say initially? Well, later on in the day, a couple of other people you may know will be on the wires talking monetary policy. Over at the Brookings Institution late Tuesday, former Fed Chair Bernanke will be interviewing the newest former Fed Chair, as Janet Yellen sits down to answer questions about her time at the Fed, her thoughts on the economy and the current challenges. And so we think this could end up in some ways being just as market moving, if not more, with Yellen still very up to speed and perhaps more willing to speak freely than a more cautious Powell. We also think the Tuesday Powell testimony should be taken with a grain of salt. Here's why.
WAIT FOR THURSDAY - When Powell testifies on Tuesday, he will be doing so ahead of the next important piece of data, as far as the Fed outlook goes. But on Thursday, when Powell testifies again, this time before the Senate Banking Committee, it could be a much bigger deal, as he will be testifying with US core PCE numbers out. If the core PCE data comes in above forecast, it could pressure the Fed Chair into revising his outlook a little. Whatever the case, it is likely to be an interesting few days in markets, as all of this plays out. Another big theme this week will be the fate of NAFTA.
NAFTA - This is a risk the market hasn't been properly considering in recent months, and this is a risk that has been quietly resulting in some underperformance in the Canadian Dollar and Mexican Peso, given their proximity to the US. But any fallout here will send a broader message to the world economy as far as the US outlook on trade goes, which could shake up global risk sentiment and trigger another round of liquidation, much like what we saw back in early February. As far as positions go, we have the one AUDNZD play and will be looking to see if the volatility from all of this gives us something else in the sessions ahead. Stand by.