It’s been fairly one way traffic for equities since Asia trading. S&P 500 futures were lightly changed earlier in the day but are now up by roughly 0.5% ahead of US trading. Wall Street opened higher yesterday but surrendered gains during the session to close modestly lower. It can be argued that there was some pre-Powell angst perhaps but that looks to be clearing up now.

So, what exactly can we expect from the Fed chair later?

I won’t expect him to rock the boat amid fears of stirring up another volatility bout in markets. As such, it is likely that Powell should just reaffirm that they are looking to cut rates next month. But whether it be 25 bps or 50 bps, that is something that he won’t pre-commit to surely.

In other words, Powell will try to play it safe. The question is, will markets sense some relief for that? Or are they going to kick and scream again to force a 50 bps move? The current pricing shows that the odds of a 50 bps rate cut are priced at ~26%. So, there is some backpedaling to do there if the Fed doesn’t deliver.

That being said, there was no issue for risk trades when we went back from six rate cuts at the end of last year to just one by May. So, what’s a quarter pricing extra of 25 bps eh?