Many Fed officials saw stronger case for rate cut last month

Gold Focused on Speeches Powell and Bostic to Set the Tone

While the United States economy has performed "reasonably well" this year, "crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook", Fed Chair Jerome Powell said in prepared remarks ahead of his two-day testimony before Congress. Meanwhile, inflation has fallen further below the Fed's annual target of 2%.

At 6:50 a.m. ET, Dow e-minis were down 69 points, or 0.26%.

"Powell's really making the case that an insurance rate cut is important so July is looking much more likely despite the fact we had a pretty good jobs report", said Chris Zaccarelli, chief investment officer, Independent Advisor Alliance, Charlotte, North Carolina.

Investors have collectively put the odds of a rate cut this month at 100%.

Last month the Fed opted to once again defy President Donald Trump and maintain interest rates.

Trump, who is counting on a strong economy for his re-election campaign, has called the Fed his biggest threat. Gold is very strong and I have no interest whatsoever in shorting this market, as the central banks around the world are all cutting interest rates.

The cooling in U.S. rate fever has seen bonds give back just a little of their huge rally, with yields on two-year Treasuries rising to 1.909 percent from the recent trough of 1.696 percent. But later, in the question-and-answer period, Democratic members of the House Financial Services Committee made clear their discontent with Trump's attacks. But over the last decade, the Federal Reserve has been banging the inflation beehive with a baseball bat and the bees haven't come out. -China trade war. The Fed minutes of the June policy meeting released on Wednesday as well echoed Powell's comments to Congress.

All eyes are on Jerome Powell as the Federal Reserve chair begins two days of testimony before Congress. He will testify again on Thursday before the US Senate Banking Committee.

"The markets had hoped for Powell to express dovish views and they got what they wanted", said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management. But he noted that "crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook".

Mr Powell pledged to "act as appropriate" to defend an economic expansion threatened by trade disputes and a global slowdown.

"Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened".

The Fed hasn't cut rates since 2008 at the height of the financial crisis.

Though the threatened tariffs on Mexico never materialised and China and the USA have agreed to resume talks to reach a trade deal, that "did little to alleviate the uncertainty that Fed officials believe is contributing to cooling momentum in global trade and domestic capex plans", Deutsche Bank's U.S. economics team wrote this week. But the economy is likely slowing.

Powell's prepared testimony assuaged those fears, though it appears that the Fed will remain cagey on when it intends to cut rates.

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