'We're not in Kansas anymore' – this phrase from The Wizard of Oz reverberates across markets, which fear hawkish comments from the world's most power
A hawkish outcome would be one in which Powell highlights the recent strength of the economy and shrugs off the recent improvement in inflation – seeing the glass half empty. I see this scenario as having a medium probability.
Telling investors that things will get worse will delight stock bears and trigger a sell-off. The US Dollar would rally, while Gold would tumble.The dovish scenario is one in which the Fed Chair celebrates the drop in inflation and the upcoming decline in underlying price pressures. Unless prices of homes, used vehicles and other non-energy and non-food items surge, Core PCE is set to decline in the autumn.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
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