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Powell Speech Sends U.S. Indices Higher, GBPUSD Records Strong Gains & Oil Prices Increase to 2-week Highs

NASDAQ, S&P 500 hit records on Powell speech

On Friday, Federal Reserve Chair Jerome Powell gave a speech at the annual Jackson Hole conference, where he hinted at future monetary policy moves.

Powell discussed the possibility of easing the Fed’s asset purchasing program, but also remained hawkish on possible earlier rate adjustments.

How monetary policy affects the economy

The Fed chair stated that, “The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate lift-off, for which we have articulated a different and substantially more stringent test”.

He mentioned that whilst the Fed’s 2% inflation rate target (mid-term), was close to being achieved, employment levels are still lower than the bank would hope.

As of writing, all major U.S. indices were trading higher, with the NASDAQ and S&P 500 hitting new highs in the process.

GBPUSD rallies as U.S. consumer sentiment declines

Currency markets also moved to end the week, with GBPUSD recording strong gains as U.S. consumer sentiment unexpectedly declined.

Figures from the Michigan consumer sentiment index dropped to a reading of 70.3 in August, versus expectations of 70.7.

How consumer confidence affects the markets

Friday’s number was the lowest since December 2011, and a huge drop off from last month’s final reading of 81.2.

GBPUSD hit an intraday high of 1.3780 on the news, which is its highest level this week, and comes as rates were consolidating for the past few days.

Many now believe that rates could be heading to a resistance level of 1.3989.

Oil prices increase to 2-week high

Oil continued to rise as the trading week came to a close, with prices all but erasing most of last week’s losses.

After beginning the week trading at $62 per barrel, WTI rose to an intraday high of $69.19 earlier in today’s session.

How geopolitics in the middle east affects oil markets

Prices of energies have rebounded as tension in the Middle East has risen in recent days, whilst stockpiles of crude have also been falling.

As such, markets have viewed this as a potential bottleneck to oil supply, ensuring that the demand for the commodity is heightening.

It is now expected that prices will break the $70 per barrel resistance in upcoming sessions.

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