Powell confirms Fed would stick to gradual hikes plan

Uncertainty about a possible change in Fed’s policy of gradual interest rate increases overshadowed global trade war concerns last week after President Trump criticized central bank’s policy of rate hikes. Global trade tensions escalated after US - China talks ended without progress.

The SP 500 advanced 0.9% for the week, closing higher than its January 26 record, while the ICE dollar index extended losses 1%. The 0.6% advance in the broad US stock market index on Friday was the biggest gain last week as Fed’s head Powell confirmed the central bank would stick to its current plan of gradual rate hikes given US economy’s strength.

The dollar weakened every session last week except Thursday. The ICE index dollar jumped 0.5% Thursday after Kansas City Federal Reserve President Esther George’s hawkish comment. She said she thought “two more rate hikes could be appropriate” this year, supporting the Fed’s current plan of rate hikes with no need to slow the pace of monetary tightening.

The releases of US and French GDP reports on Wednesday are the most significant events this week. Consumer price index data including the US personal consumption expenditure and euro-zone inflation reports on Thursday and Friday will also be closely watched.