Investors Eyeing Powell, US Consumer Inflation Data

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Federal Reserve Chairman Jerome Powell reiterated on Wednesday that he would serve out his full four year term, despite continued criticism from President Donald Trump-the man who appointed him.

In the first day of closely watched congressional testimony, Federal Reserve chairman Jerome Powell said the case for lower borrowing costs "had strengthened" owing to headwinds caused by global trade uncertainty.

CGTN's Giles Gibson has the details. Furthermore, investors solidified their expectations for at least a quarter-point rate cut at the end of this month.

A key measure of US inflation, the core consumer price index will be released on Thursday.

"Obviously it is complicated by the fact that the president has called for rate cut but we still see indications that uncertainty is starting to be a drag on the economy", he said. It is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.

In a speech at an OMFIF Foundation meeting at Washington University, Bullard said the Fed should be concerned that inflation remains stubbornly below its 2 percent target. Trump has also explored the legality of demoting Powell from the Fed chair and claimed he has that authority.

- Dollars supported by inflation surprise but data won't prevent Fed cuts.

While the focus was on Powell on Wednesday, St. Louis Federal Reserve Bank President James Bullard highlighted the importance of higher inflation.

The Fed lifted USA borrowing costs four times in 2018, leaving the Fed Funds rate range at its current 2.25%-to-2.5%, boosting the appeal of US assets in the process and helping to lift the Dollar by 4% against rivals that year.

In testimony to Congress on Wednesday, Powell pointed to "broad" global weakness that was clouding the USA economic outlook amid uncertainty about the fallout from the trade conflict with China and other nations. "What we'd like to do is take out some insurance against the possibility of a sharper-than-expected slowdown".

A trader shows USA dollar notes at a currency exchange booth in Peshawar, Pakistan December 3, 2018.

With Fed rate cut odds climbing again, the US Dollar (via the DXY Index) has been knocked lower, keeping the threat of a major US Dollar top in place.

Traders are now looking forward to Powell's second day on Capitol Hill as well as the release of inflation data, with observers saying a weak reading could revive hopes for a big July rate cut.

Furthermore, while adding onto his previously mentioned thoughts about Bitcoin as having the potential to transition the United States into a new era of banking and finance, Powell also explained that he believes BTC's main utility presently is being a store of value, much like gold.

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