Fed’s Powell Testifies, EIA Crude Inventories, U.S. 10-Year Bond Auction

The EUR/USD pair closed near 1.0800, marking a 0.15% decrease following market disappointment with Federal Reserve (Fed) Chairman Jerome Powell’s testimony before the US Congress on Tuesday.

While the Fed acknowledged improvements in inflation, its cautious approach caught the markets off guard, dampening expectations for a change in the Fed's stance.

Market activity for the remainder of the week will likely be influenced by the US Consumer Price Index (CPI) inflation data scheduled to be released on Thursday.

Additionally, early Thursday will see the release of German Harmonized Index of Consumer Prices (HICP) inflation figures, with year-over-year German inflation in June anticipated to remain stable at the previous 2.5% reading.

Gold prices saw minor gains on Tuesday, holding firm in the face of a stronger dollar and climbing bond yields. Investors are eagerly anticipating the release of U.S. June inflation data later this week, in hopes of gaining more insight into the future path of U.S. interest rates.

There is a prevailing expectation that the Federal Reserve is increasingly likely to begin cutting rates as early as September, which is having a positive impact on current market conditions.

Attention is now turning towards the release of the consumer price index (CPI) data on Thursday, with recent figures indicating a cooling from the unexpectedly high levels seen at the beginning of the year.

Oil prices experienced a decrease on Tuesday as reports indicated that the extended supply disruptions resulting from Hurricane Beryl were less likely, following minimal storm damage to a U.S. oil-producing hub in Texas. Although some offshore U.S. production sites were evacuated, ports were closed, and refining operations slowed down, major refineries along the country's Gulf Coast appeared to have been minimally impacted after Beryl weakened into a tropical storm.

Oil investors also had a mixed reaction to comments by Federal Reserve Chair Jerome Powell, who told a Congressional hearing on Tuesday that the economy was no longer overheated and that the job market had eased. Despite indicating a possible nearing of interest rate cuts, oil prices sank farther after the remarks as a weakening economy could hinder crude demand.

U.S. stock futures moved in a tight range on Tuesday, ending the session with minor losses.

Testimony from Federal Reserve Chair Jerome Powell saw markets largely stick to their expectations for a September interest rate cut, even as Powell did not appear to have directly telegraphed a cut. The Fed Chair is set to testify further on Wednesday.

The US 500 and the US Tech 100 achieved new all-time highs on Tuesday; however, the rate of their gains seemed to be slowing down significantly. The upturn was mainly driven by prominent technology stocks, reflecting the ongoing excitement surrounding artificial intelligence.

In addition to Thursday’s CPI data, this week's focus is firmly on the commencement of the second quarter earnings season, as a number of major Wall Street banks are slated to release their reports on Friday.