Ian Shepherdson, a Chief US Economist at Pantheon Macroeconomics, said: “Markets appear to have been expecting him to offer a bit of resistance to the idea that a rate cut at the end of this month is a done deal. That didn’t happen.”
Chairman Powell also said that the US economy was struggling in the face of a weakening global economy and rising trade tensions with China, further hinting that policy makers could ease conditions in the near-term.
Pound traders, meanwhile, are awaiting the Bank of England’s (BoE) financial stability report, due to be released later on this morning.
This will assess the health of the UK’s financial system. A gloomy report could weigh on GBP exchange rates.
The BoE’s Governor Mark Carney will then deliver a statement.
Mr Carney could hint at risks concerning the global economic outlook and falling inflationary pressures, an attitude which could dampen Sterling sentiment.
The Fed’s Jerome Powell is also set to deliver his second round of testimony this afternoon, which could provide further insight into the timeframe for any policy loosening.
Today’s publication of US inflation figures for June will also be of interest.
Avery Shenfield, Chief Economist at CIBC Capital Economics, however, warned: “If … core CPI readings don’t show a reheating, a July rate cut could be a lock.”
If US inflation dips, we could see the GBP/USD exchange rate extend gains over the course of the afternoon.