Fed: Powell has proven his power to shake markets and he will likely do it again

Jerome Powell, Chairman of the Federal Reserve, will speak at a webinar organized by the Peterson Institute at 13:00 GMT, just before US markets open. Yohay Elam, an analyst at FXSStreet, points out five factors to watch.

Key quotes

“Powell is expected to categorically deny the option of setting negative interest rates and that may marginally weigh on stocks and support the dollar. However, if he surprises by refusing to rule out going below zero, the dollar will likely dive and stocks could surge.”

“He will likely repeat his general pledge to act whenever needed and that is priced in. If he goes into specifics and about fresh ideas to stimulate the economy and mentions numbers, the dollar could drop and stocks to rise.”

“If Powell sees the fall in prices as another reason to be worried and act, it would be adverse for the greenback and positive for stocks, especially if he expresses concerns of deflation. If he views weak inflation as part of the economic downturn, markets will move onto the next topics.”

“If Powell indirectly backs Pelosi, who began detailing another plan in the trillions of dollars, that could boost stocks and weigh on the dollar. It would help push politicians into that direction.”

“On the one hand, dire forecasts could send stocks down the safe-haven dollar up. On the other hand, an economic deterioration opens the door to more Fed stimulus.”