US stock index futures, after yesterday's rebound and the best session for the Dow Jones index since March, seem to be consolidating as investors await the Fed chairman's testimony before the Select Subcommittee on Coronavirus Crisis of U.S. House of Representatives.
Material released so far shows that the U.S. economy has shown sustained improvement due to widespread vaccination and unprecedented monetary and fiscal policy actions, Fed Chairman Powell said in prepared testimony. Inflation, however, has risen significantly in recent months, reflecting a low base effect, the translation of earlier oil price increases into consumer energy prices, a rebound in spending as the economy reopens. As these temporary supply-side effects fade, inflation is expected to fall back toward our longer-run target, Powell wrote. In prepared remarks, Powell reiterated that the recent jump in inflation to a 13-year high will prove temporary and that the central bank will continue its supportive stance on the economy. Investors will be expecting an update on the tapering schedule after the Fed accelerated its expected pace of policy tightening and signaled the start of tapering talks, but gave no further details. The FOMC chairman's speech is scheduled to begin at 20:00.
Meanwhile, sentiment continues to deteriorate in the cryptocurrency market, where bitcoin fell below $32,000 on Tuesday after losing more than 10 percent in the previous session. The People's Bank of China has urged banks and payment companies to stop facilitating virtual currency transactions and not provide products or services such as trading, clearing and settlement of cryptocurrency transactions. Earlier this week, Sichuan was the last province to demand the closure of 26 suspected cryptocurrency mining projects by Sunday, meaning that about 90 percent of China's bitcoin mining capacity is estimated to be shut down. These are clear signs that Chinese authorities are committed to banning cryptocurrency and bitcoin-related activities in an attempt to stop speculation and maintain financial security. In May, the Chinese government called for a crackdown on bitcoin due to concerns over energy consumption. And Microstrategy's tenacious CEO, Micheal Saylor, announced yesterday that the company he heads has bought more bitcoins for nearly $0.5 billion and now holds 105,000 bitcoins.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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