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The Markets Are Awaiting US Economic Growth After Powell’s Comments, Which Were Less Hawkish

On Thursday, in addition to the GDP figures that were released earlier today in the United States, markets will be looking for signs of a further slowdown in German inflation for July during the opening of markets in Europe.

The number decreased from 8.7 per cent in May to 8.2 per cent in June, and it is anticipated that it will drop even further to 8.1 per cent in July.

The Federal Reserve increased the target range for short-term interest rates by another 25 basis points on Wednesday, marking the second increase in as many meetings.

However, Federal Reserve Chairman Jerome Powell indicated that the bank may slow its rate increases in the future if it becomes clear that more restrictive monetary policy is successfully bringing inflation in the United States under control.

In this regard, inflation appears to continue well into next year, which may require the Fed to maintain its hawkish stance.

Despite this, there is a glimmer of hope that the comments made by the Fed on Wednesday may signal the end of aggressive monetary tightening at some point shortly.

This is because the economy has been showing signs of a slowdown in the wake of the Fed’s recent rate hike of 225 basis points.


Fed funds futures, which reflect investor expectations of central bank policy rates, have priced in a more dovish outlook since Powell’s comments.

These futures reflect how investors anticipate the Fed will set interest rates. The probability of the Federal Reserve delivering a rate increase of fifty basis points in September, as opposed to a third increase of seventy-five basis points, increased from fifty-one per cent to sixty-five per cent.

Throughout most of this year, the Federal Reserve has taken a hawkish stance. After a year in which inflation has repeatedly surprised markets and forced policymakers to tighten monetary policy, it appears that we are getting close to a point at which hawkishness will have reached its peak.

Dollar values dropped in the wee hours of Thursday morning as a result of statements made by Jerome Powell, Chairman of the US Federal Reserve, that sounded less hawkish than expected regarding potential interest rate increases.

The US stock market continued its upward trend on Wednesday, even though the economy was showing signs of contraction. Tech and growth stocks drove the Nasdaq to a gain of 4.1 per cent, the largest daily percentage gain for the index since April 2020.

The benchmark S&P 500 index has gained nearly 10 per cent since reaching its low point in the middle of June, after falling by as much as 23.6 per cent during the first half of the year.

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On Thursday, the focus will be on economic data about the second quarter of the year in the United States as well as weekly jobless claims.

Following a decline of 1.6 per cent in the first quarter, the question of whether or not the United States is currently experiencing a technical recession is an important one.

After yesterday’s encouraging report on durable goods, we will find out later today with the first estimate of Q2 GDP, which is projected to come in at 0.5 per cent. We will then know for sure.

The number of people filing new claims for unemployment benefits each week has also been climbing in recent weeks, reaching 251k the week before last. This trend is anticipated to continue, and the number of people filing is expected to reach 253k.

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