S&P 500 Futures, yields extend recent recoveries ahead of Fed’s Powell

• Market sentiment appears positive as traders brace for the key events.
• Fears of recession, central bank aggression seem to take a back seat amid death of major data/events.
• Juneteenth offered a negative week-start to the USD, stock futures, yields extend Friday’s gains.
• Second-tier US statistics may entertain traders ahead of Powell’s Testimony.

Risk profile remains cautiously optimistic during Tuesday’s Asian session as traders brace for the week’s key events with mixed feelings.

While portraying the mood, the S&P 500 Futures rise over 1.0%, up for the second consecutive day, as it flashes the 3,720 level. On the same line, the US 10-year Treasury yields extend Friday’s gains to begin the week’s trading around 3.3%, up six basis points (bps) by the press time.

A light calendar and the central bankers’ justification of the latest hawkish moves allowed the market players to portray a relief rally on Monday. Also favoring the risk-on mood were headlines suggesting an improvement in China’s covid conditions and the US readiness to ease the Trump-era tariffs on the dragon nation.

Furthermore, multiple policymakers from the European Central Bank (ECB) and the Bank of England (BOE) shrugged off the market’s expectations of aggressive rate hikes. On the same line were the recent comments from Reserve Bank of Australia (RBA) Governor Philip Lowe.

Additionally, downbeat prints of the US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, also allowed the markets to take a sigh of relief. That said, the US inflation expectations refreshed monthly low on Friday.

Amid these plays, the US Dollar Index (DXY) extends the week-start losses to 104.30, down 0.20% intraday by the press time, which in turn allows the commodities and Antipodeans to cheer the risk-on mood.

However, cautious sentiment ahead of Fed Chair Jerome Powell joins fears that China may fail to recover even during the second half of the year (H2) to challenge the market optimism.

That said, Chicago Fed National Activity Index and the US Existing Home Sales for May will entertain intraday traders but major attention will be on the full markets’ reaction to the latest shift in the risk appetite.