Fed Chair Powell begins 2 days of semi annual congressional testimony today with the Senate Banking Committee at 10am.  In recent years, this testimony has devolved into laughable political theater, mostly.  That said, today's has a few redeeming qualities.  

First off, the Senate session tends to be slightly less theatrical than the House version coming up tomorrow.  Beyond that, we know from Powell's previous congressional appearances that he tends to navigate the political posturing with more grace than Yellen--something that tends to help move the legislative blowhards through their grandstanding more quickly.  

Finally, despite all the theater, the fact remains that this is a venue for the Fed Chair to answer unscripted questions.  Therefore, there will always be big market movement potential, even if it is frequently unrealized.

In gearing up to hear what Powell has to say, we can consider the recent evolution of rate hike odds.  Listening to various Fed speakers over the past few weeks, I've gotten the sense that "4 hikes in 2018" is far less of a given than it had been a few months ago, largely due to a combination of geopolitical uncertainty and trade-related uncertainty.  I was surprised to see that Fed Funds Futures for the end of 2018 suggest as high a probability for 4 hikes as we had before those uncertainties began rifling through markets in late May.  

In the chart above, it's hard to see, but there's a slightly bigger gap for September's rate hike odds between current levels and peak levels.  2018's odds are essentially back to their highs.  The takeaway is investors see hikes, in general, as being just as likely by the end of the year, but not quite as likely in September.  The reason for the discrepancy is that some investors are betting on 4 hikes for 2018 while others only see 3.  We can see how likely a 4th rate hike would be (the 3rd is very much priced in) by looking at the spread between end-of-year Fed Funds Futures and end-of-September's.  Long story short, a 4th hike is as priced-in as it has been.

All of the above suggests that the biggest risk associated with Powell's testimony is actually that he would say something bond-friendly (because markets are pricing in an aggressive Fed, despite recent dovish comments).