Powell to testify in front of Congress Amidst recession worries

Since the warning by IMF Chair, Kristalina Georgieva, of an incoming recession this year the US dollar has seen unprecedented levels of inflation and many people have developed doubtful outlooks regarding the US economy. To combat inflation the Federal Reserve has been hiking interest rates to record highs, but now that we have seen a decrease in inflation last over the month one can begin to wonder if the federal reserve may decide to change its hiked interest rate policy. This is why the testimony by Jerome Powell( the Chair of the Federal Reserve) today is something you want to pay close attention to if you trading any USD related currency pair.

Who is Jerome Powell

Powell can be said to be the most powerful civil servant in the world due to the fact that he leads the FED which dictates monetary policy for the USA (the biggest economy in the world) which in turn affects the global economy at large. The US dollar is the most traded currency in the forex market. The decision of Powell affect the dollar and hence it affects the market.

The current state of the US economy

There has been much fear concerning the onset of the recession in the US for the past couple of months. These fears have been backed by the occurrence of record high inflation over the last few months. Inflation reached a record high of 9% last year June, and has been on a steady downturn to the rate that we have today of 6.4 %.

The FED has had to rely on record high interest rates hikes in an attempt to cool the overheating economy, however, these can also have detrimental effects on the economy as it discourages lending and spending by businesses in the economy. The inflation reports of last month came out more positive that expected hence the testimony that Powell will give today in front the committee will be important to investors all over the world as it will give insight as to the economic outlook of the US that the FED has and hence give the rational behind the incoming FED decisions.

What does this mean as traders？

Today we should be ready for unexpected market volatility around 10 am New York time. As always, you are encouraged to exercise good risk management as the market will try shake people out very quickly. You do not want to be in a negative trade that blows your account before you can even close it. This testimony kicks off a week that is has multiple important economic announcements day after day hence it is encouraged that you take profit when you can as the market may turn time and time again in unexpected ways.