Weekly Comic: Hawkish Powell Comments Spark Dollar Rally

Investing.com - Federal Reserve Chair Jerome Powell gave an upbeat assessment of the U.S. economy during congressional testimony this week, and downplayed the impact of uncertainty over U.S. trade policy on the outlook for additional rate hikes.

In closely watched congressional testimony on Tuesday and Wednesday, the Fed chair said there were "several years" of strong jobs and low inflation still ahead for the U.S. economy.

Powell's bullish comments mostly affirmed expectations for two additional rate hikes by the central bank this year.

The Fed has been ahead of its peers in tightening monetary policy and is expected to have raised rates a total of four times in 2018 to tackle rising inflationary pressures.

The U.S. dollar surged to its highest level in a year after Powell's hawkish testimony.

The dollar index, which measures the greenback’s strength against a basket of six major currencies, rose to a high of 95.44 on Thursday, the strongest level since July 14, 2017.

Elsewhere, in the bond market, U.S. Treasury prices edged lower, pushing yields higher across the curve.

The benchmark 10-year yield rose to around 2.88%, while the Fed-sensitive 2-year note was at 2.62%.

The narrowing gap between 2-year and 10-year Treasury bond yields has added to investor caution, given the so-called yield curve's record in predicting recessions.

An inverted yield curve, a phenomenon in which the two-year yield becomes higher than the longer-dated Treasury yield, is sometimes seen as a sign of waning confidence towards the economy and a signal for a recession.

To see more of Investing.com’s weekly comics, visit: http://www.investing.com/analysis/comics

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