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Analysts at TD Securities suggest that it’s showtime for Fed Chair Powell, who will be testifying on Capitol Hill on the semi-annual update on the economic outlook.

Key Quotes

“Not too long ago, Powell gave an unequivocally upbeat view on the state of the US economy and its prospects. But with an appreciable escalation in global trade relationships, markets will be attuned to whether he sheds more caution.”

“With G7FX vol relatively muted compared to its EM counterparts, concern from the horse’s mouth may finally shake some USD long positioning. This could take place in the context of established ranges however, but we would refrain from attempting to chase a breakout at this time despite some HFFV discounts (like JPY, EUR and GBP), as the combination of a summer lull and carry costs are hurdles to strap on extended USD shorts.”

“A defensive stance on the dollar bloc remains appropriate still, as trade concerns and risks to the growth outlook may outweigh a tactical USD move for these small open economies.”