Stocks surge after Fed signals probable rate cut

Stocks surge after Fed signals probable rate cut

Bloomberg News reported earlier in the day that White House, in February, had explored the legality of stripping Powell of his chairmanship and leaving him as a Fed governor, just two months after Trump discussed firing him.

Though US economic growth remains largely on track, and the jobs report for June showed continued strong hiring, the events of May changed US trade policy from something of a sideshow in the Fed's view to a central concern. Of course, President Trump wants rates lower as do financial market investors.

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At the hearing, Powell received bipartisan support for his independence at a time when the Trump administration is openly attacking the policies of the Federal Reserve.

The weak dollar also sent the price of gold rallying 2 per cent to sit around US$1,420 an ounce.

The dollar inched lower on Thursday in thin summer trading, as its outlook remained grim after Federal Reserve Chair Jerome Powell's bleak comments on the USA economy, which bolstered expectations of an interest rate cut later this month.

Trump has criticized Powell and his colleagues on a regular basis for nearly a full year - first calling on the Fed to stop, and then to reverse, its 2018 interest-rate increases. The Fed Funds rate is now 2.5%. "Sterling has galloped over 100pts higher since Powell re-affirmed the bond market's desire for rate cuts".

Prepared remarks by the head of the US central bank - delivered to a committee of the US Congress on Wednesday morning - may bolster expectations of an interest rate cut later in July.

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President Trump has repeatedly argued that the US economy would be growing faster if the Fed lowered interest rates. On average, the economy has added 172,000 nonfarm payrolls per month between January and June.

A man counts US dollars in Tehran, Iran July 7, 2019.

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During Powell's testimony before the Senate Banking Committee on Facebook's planned Libra cryptocurrency, he said: "The size of Facebook's network means it could be, essentially, immediately systemically important".

Above: Euro-to-Dollar rate shown at 4-hour intervals. The sharp rise in Fed rate cut odds around Fed Chair Powell's congressional testimony has proved to undercut US Treasury yields and the US Dollar in one fell swoop.

But he warned of economic weakness in other major economies, and a downturn in business investment driven by trade war worries. The current Fed rate is set at 2.25 per cent to 2.5 per cent.

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After raising rates four times previous year, the Fed has indicated in January that it would be "patient" with future hikes.