Powell in the House

Federal Reserve Chair Jerome Powell starts his semi-annual monetary policy testimony to Congress at 10 a.m. Eastern Time this morning. He is expected to stick to the line that the bank will “act as appropriate,” a stance that should serve to reinforce bets on a rate cut at the July 30-31 meeting. He will also probably have to defend the independence of the central bank as lawmakers are certain to ask him about the continuing criticism from President Donald Trump. At 2:00 p.m., the minutes of the last FOMC policy meeting are published.

Softly does it

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke on the phone with Vice Premier Liu He and Commerce Minister Zhong Shan yesterday in the first confirmed contact between the two parties since Trump and Xi met at the G-20. Both sides said dialogue would continue without outlining next steps. China’s leadership remain cautious on the chances of a lasting deal, with many seeing Trump’s 2020 election strategy likely to, um, trump any deal between the countries.

Outlook cut

The European Commission cut its euro-area growth and inflation forecast for next year in its latest quarterly estimates.  The projection comes as investors see a recession in Europe’s largest economy as almost inevitable, and amid rising expectations of further easing from the European Central Bank. There was some slightly better news for the U.K. economy, where data published this morning showed a rebound in May as car factories resumed production following Brexit-related shutdowns in April.

Market quiet

Overnight, the MSCI Asia Pacific Index gained 0.1% while Japan’s Topix index closed 0.2% lower as investors awaited Powell’s testimony. In Europe, the Stoxx 600 Index was down 0.2% by 5:50 a.m. with oil and gas among the few sectors posting a gain as crude prices rose. S&P 500 futures pointed to another open in the red, the 10-year Treasury yield was at 2.105% and gold slipped.

Coming up…

The Bank of Canada is expected to keep its policy rate unchanged when the latest decision is announced at 10:00 a.m. At the same time in the U.S., Powell begins his testimony and wholesale inventories data for May is released. Federal Reserve Bank of St. Louis President James Bullard will speak at 1:30 p.m. Bed, Bath & Beyond Inc. is among the companies reporting earnings.