All eyes will be on US Fed chair Jerome Powell’s speech today. Powell will be speaking at 10:30 a.m. ET on March 30 at Harvard University, Cambridge, Massachusetts. Powell is scheduled to take part in a moderated conversation at Harvard University’s course on principles of economics.
Powell is expected to talk about the ongoing Iran war and its impact on inflation, as oil prices have risen more than 40% since the war began. Brent trades at $115, up over 60% since the war began.
“Should oil remain elevated, this does not bode well for stocks, as high oil prices function as a tax on nearly every aspect of economic activity, and stocks are reflecting this. For equities to gain a foothold, oil prices must drop,” says Aaron Hill, Chief Market Analyst, FP Markets.
The Dow has entered the correction zone after falling 10% from its most recent peak. Since the war began, the S&P 500 and Dow indices have been down nearly 8%. The U.S. Dollar Index, which tracks the value of the greenback against a basket of currencies, rose 0.3% to 100.16.
It’s not clear yet how much of the price increase has permeated goods and services. The Iran war began on February 28, so will the March US CPI data reveal the real impact? It is unlikely.
The March US CPI data is expected in mid-April, but because inflation takes 6-8 weeks to be reflected in prices, the April US CPI data, which will be released in May, will be critical to the future rate path.
Meanwhile, Powell is expected to maintain his position that incoming data should be considered before deciding whether to cut interest rates. Unlike the situation before the war, markets now expect the US Fed to cut rates only once in 2026, rather than twice this year.
As of now, all options are on the table, including a rate hike. There are some market experts who believe the US Fed might not just refrain from cutting rates but even go for a hike, in case inflation reignites in the economy.
Powell, whose tenure as Fed chair expires in May, has stated that he will not resign his position as a member of the Fed’s board of governors until the investigation into the management of the central bank’s renovations is fully closed. The Senate Banking Committee plans to hold a hearing on Kevin Warsh’s nomination to chair the Federal Reserve by the week of April 13, reported Reuters.
Iran War Latest
Tensions heightened as President Donald Trump suggested the possibility of seizing oil in Iran, specifically targeting Kharg Island, reminiscent of a recent US military operation in Venezuela.
The US is preparing for extended ground operations in Iran following the arrival of additional troops, while Iran-backed Houthi militants in Yemen have engaged in the conflict, targeting Israel.
Data Releases
The U.S. jobs report for March is set to be released on Friday, amid increasing scrutiny of the labor market following a reduction of 92,000 jobs in February. Additionally, private sector hiring data for March will be available through the ADP report on Wednesday. The US stock market will be closed on Friday, April 3, on account of Good Friday.
Which way the Iran war turns will set the direction for the markets. Keep an eye on oil prices and the dollar’s movement to determine the direction of the wind.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.