Asian shares mostly higher ahead of Fed chief testimony

Daniel Fowler
July 10, 2019

Since the start of the year, global equities have been bolstered by expectations central banks will keep interest rates at or near record lows to boost economic growth.

He will likely strengthen forecasts of a quarter-point United States rate cut at the end of this month but could also dampen expectations of more rate reductions to follow soon.

Market focus is largely attuned to the testimony of Federal Reserve Chairman Jerome Powell, with investors anxious to learn whether he will confirm or confound expectations for USA policy easing this month.

Powell is scheduled to appear before the U.S. House of Representatives Financial Services Committee at 10 a.m. EDT (1400 GMT) as part of his semi-annual monetary policy testimony to Congress.

He still thought the Fed would cut by 25 basis points this month - the first US cut since the financial crisis - but whether it keeps going was much less clear.

"Signaling more interest rate cuts at this point may put the central bank's independence in jeopardy".

The gold market is seeing the biggest price swings since late 2016 as traders and investors struggled to read when the Federal Reserve may cut interest rates.

With investors in contracts linked to the Fed's targeted overnight lending rate putting the probability of a rate reduction at close to 100 percent, "it would be unprecedented for the Fed to not cut", Lavorgna wrote. "Despite the robust NFPs last week, there are simply too many signs of slowdown in several sectors of the economy for the Fed to do nothing and risk falling behind the curve". The euro was little changed at $1.1209, inching up from $1.1203.

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TOKYO, July 10 (Reuters) - The dollar neared a three-week high against a basket of major currencies on Wednesday as investors continued to unwind bets on deep USA interest rate cuts, pushing Treasury yields higher.

The case for lowering borrowing costs isn't fully decided. "The immediate pressure on the Fed to cut was removed because of the jobs report".

"The market still expects the Fed to cut rates later this month".

Investors have been mostly pausing ahead of the two days of congressional testimony from Federal Reserve Chair Jerome Powell.

At the Fed's last policy meeting in mid-June, eight of the 17 policymakers saw the need for at least one rate cut by year's end, and Powell told reporters afterwards that many others were leaning in that direction.

Powell's written testimony will be released at 1230 GMT.

Overnight, Atlanta Fed President Raphael Bostic said the central bank was debating the risks and benefits of letting the US economy run "a little hotter".

"Business investment growth seems to have slowed notably; may reflect concerns about trade tensions and slower global growth".

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