Market Overview
As inflation continues to rise and cripple spending power, a recession looks more likely than ever, with energy being the critical factor in spiralling costs. As the ongoing conflict in Ukraine appears to be getting worse, the price of Gas, Oil and Wheat look set to rise further and continue to disrupt global markets.
The US may allow more Iranian oil to sell on western markets by removing current sanctions to curb rising prices. OPEC members are also considering removing Russia from the group, allowing the Saudis and the United Arab Emirates to pump more and ease prices.
The US has also suggested lifting China tariffs to help curb inflation by supplying consumers with cheaper household goods.
Currencies
This Friday, the U.S. CPI data will be the focus for investors looking for signals about the Fed’s plans. The Fed looks set to continue to increase interest rates by 0.5pts every month until inflation drops. Rumours of a surprise 0.75pt hike are on the cards, this would be a bullish move, but it remains unlikely.
Meanwhile, the ECB will announce an end to its bond purchasing this week, which signals a step towards the first interest rate hike since 2011. It’s unclear when this may happen, but Investors are pricing in a hike for October. Confirmation of an interest rate hike will be a strong buy signal for EUR.
At the start of the week, EUR/USD made some recovery gains after the dollar closed the week strong after positive Non-Farm Payroll figures dropped on Friday.
GBP/USD has also recovered from Friday’s sell-off to return above 1.2500. A vote of no-confidence will take place on Monday for UK PM Johnson, a change of leadership could be seen as bullish for GBP in the midterms but would prolong any immediate economic policy changes happening in the short term.
WEEK AHEAD
Monday
GBP No confidence vote in UK PM Johnson
Wednesday
EUR Gross Domestic Product s.a. (YoY)(Q1)
Thursday
EUR ECB Interest Rate Decision & Press Conference
Friday
USD Consumer Price Index ex Food & Energy (YoY)(May)
USD Michigan Consumer Sentiment Index(Jun) PREL