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Powell Sounds Surprisingly Dovish, Oil’s Rally Continues

Fed Chairman Jerome Powell

Ahead Of Congressional Meetings, Fed Hints 50 bp Cut Not Out Of Question

In remarks this morning, Federal Reserve Chairman Jerome Powell took a decidedly dovish tone, noting that “Uncertainties since the June FOMC meeting continue to dim the outlook” for the U.S. economy.  He reiterated his pledge that the Fed would consider all relevant factors and “act as appropriate to sustain the expansion.”

Any outlying concerns that the Fed might skip a July rate cut were assuaged, and some optimistic investors may even take the comments as a signal that if global economic contraction worsens and U.S.-China trade tensions aren’t resolved, a 50 basis point cut may still be in play, but the market has fully priced in a more prudent cut of 25.

Stocks moved modestly higher on Powell’s comments.

Oil Prices Up 5 Days In A Row

Based on several factors, oil prices are up for a fifth consecutive trading session. September Brent (BRNU19) was up $1.53 to $65.69 a barrel.

The driving factors:

  • Several oil companies have evacuated Gulf of Mexico offshore platforms due to a growing storm
  • Data from yesterday’s American Petroleum Institute report showed inventories are down over 8 million barrels
  • Inventory declines are set to reach the four week mark
  • OPEC and a Russia-led coalition of oil producers agreed to production cuts through March of 2020 following the G20 summit
  • Tensions between the U.S. and Iran continue to stir the specter of a Strait of Hormuz conflict that would block the safe passage of oil tankers

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