Published: Wed, June 26, 2019
Markets | By Otis Pena

Draghi would be better Fed chairman than Powell

Draghi would be better Fed chairman than Powell

All three major USA indices declined on Tuesday as the market was disappointed at Federal Reserve Chairman Jerome Powell's remarks on the central bank's possible monetary policy moves as well as weaker-than expected economic data.

Congress "chose to insulate the Fed" from political pressure "because it had seen the damage that often arises when policy bends to short-term political interests", Mr Powell said in his speech at the Council on Foreign Relations in NY.

Separately, St. Louis Fed President James Bullard told Bloomberg Television he does not think the USA economy is dire enough to warrant a 50-basis-point cut in July, even though he pushed to lower rates last week.

His remarks mirror those he made in early June, . when he hinted at a possible rate cut going forward. The RBNZ kept rates on hold at its policy meeting today but indicated it may need to cut rates again to meet its objectives.

"He's trying to prove how tough he is", Trump said out of frustration. The S&P 500 gained 5.33 points, or 0.18%, to 2,922.71 and the Nasdaq Composite added 48.14 points, or 0.61%, to 7,932.85. Japan's Nikkei retreated 0.6%.

"The question my colleagues and I are grappling with is whether these uncertainties [over trade disputes and weak inflation] will continue to weigh on the outlook and thus call for additional policy accommodation", Mr Powell said.

"The focus is now on the G20 summit".

Mr. Powell's remarks also lifted the USA dollar out of a five-day streak of losses.

Gold soars to near six-year high
Modest open likely for the USA markets Tuesday after key US stock index futures looked relatively subdued on Tuesday morning. President Trump imposed sanctions on Iran which further escalated the trade tension between the two countries.


Markets still firmly expect the USA central bank to ease policy but comments from Powell and others were enough to weaken bets on the decisive new support for growth that has driven stock markets steadily higher this month.

The index had bounced back from 95.843 on Tuesday, its lowest level since March 21, following comments from the top Fed officials. The dollar's gains were strongest against the Japanese yen, rising 0.3% after having hit a new 52-week low in the prior session.

In commodities, oil markets rallied as the rhetoric between Iran and the US grew more confrontational and after data from an industry group late Tuesday showed USA crude stockpiles fell by more than expected.

The euro slipped 0.1% to $1.1353 after being nudged off a three-month peak of $1.1412.

Richmond Federal Reserve President Thomas Barkin said there was a risk of recession for the United States but when asked if a rate cut might be needed this year, he said: "I don't know". But the kiwi's gains were limited as the central bank expressed concern towards economic risks at home and overseas.

Last week, the Fed left rates unchanged and signalled that it was prepared to begin cutting rates if needed to protect the economy from trade battles and other risks.

The U.S. data helped underpin a crude market already buoyed by worries over potential U.S. -Iran conflict. However, August gold still managed to settle at $1,418.70 an ounce, the highest finish for a most-active contract since August 28, 2013.

Gold was down 1% at $1,407.61 an ounce, headed to snap a six-day winning streak.

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