Euro Area Is Poised For Positive Opening As U.S. Markets Digest Powell's Speech | Daily Market Analysis

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• USA – Crude Oil Inventories

European markets had a mixed session yesterday, tempered by some uncertainty ahead of scheduled comments from Fed Chairman Powell, who was expected to take a slightly different, more hawkish tone in light of Friday's US jobs report.

Wall Street, on the other hand, ended the session with a solid gain after an initial decline.

Despite the uncertainty, the commentary was a bit sparse, with Powell repeating his comments about the presence of disinflationary trends, but at the same time insisting that the Fed still has some way to go to get inflation back to the target level and that it could take until next year.

Overall, Powell's comments were only slightly more "hawkish" than his remarks at the press conference, but US markets didn't seem to care much, and they ended the day with strong gains, even as bond yields remained steady at their recent highs.

This resilience in the U.S. looks like it will lead to a positive opening for European markets this morning.

Ironically, it was the Nasdaq that led gains in the US yesterday, even though the prospects for rate cuts this year have disappeared and the likelihood of two consecutive 25bp rate hikes in March and May has increased. Not only that, there is every indication that rates could rise even higher than the 5.1% final rate that the market currently estimates.

With Minneapolis Fed President Neel Kashkari reiterating his belief that the federal funds rate will be 5.4% before the pause, and he is generally considered one of the dovish voices on the FOMC, we can assume that the US markets are again betraying wishful thinking when it comes to where rates might go over the next 12 months.

Later today, we will hear from two more voting members of the Fed: New York Fed President and Vice Chairman John Williams will speak just before the opening bell, and Governor Michael Barr will speak shortly thereafter. Markets are expected to analyze any comments that could be considered hawkish. However, given recent experience, the markets don't seem to care much, and at this point, they just want to go higher.