Powell back in the spotlight, bitcoin rebounds

US futures are flat while Europe is seeing a small recovery after trading in the red earlier in the session.

We’re going through a very choppy period in the markets, with investors uncertain how to read the movements we’re seeing in bond markets. The curve is steepening and investors are fretting a little about the prospect of higher inflation.

Policymakers are doing their best to alleviate these fears but there appears to be a growing consensus that we will see more inflation this year as a result of the turbo-charged recovery everyone is anticipating. The question is how temporary any inflation spike would be and how willing policymakers will be to look beyond it.

They may have a more relaxed approach to rising inflation than they have in the past but that will only go so far if prices are rising faster than what we’ve seen for many years. This may make for a jumpy year in the markets, with any signs of inflation seeing jitters quickly return and any rallies to stall, just as we’re experiencing at the moment.

Jerome Powell will have another opportunity to quell these fears today but I struggle to see what he can say that he didn’t yesterday. Rather, the greater concern is that he says something that fuels the unease, rather than alleviates it. I don’t see this as likely but it will be interesting to see where markets stand after because we’ve only seen a marginal improvement since yesterday’s appearance.

Bitcoin sets its sights higher

Bitcoin is once again making a strong comeback today, up around 5% and back above USD50,000. It fell sharply earlier this week on the back of Elon Musk’s belief that it is a little high, which triggered some profit-taking across the crypto space. As is so often the case, the correction was short and sharp and I imagine crypto fans already have their sights set on new highs.

I’m not sure Tesla’s shareholders will be too thrilled with Musk creating two-way price action on bitcoin given their recent investment and its own price plunge over the last 48 hours. Either way, I struggle to see this being too painful for long. The party goes on.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.