An improved mood the markets a boost last week after sustained losses throughout May. EUR has found support and began to claw back losses against the USD, but this rally may be short-lived if data shows the global market is closer to a recession than we think, which in turn would strengthen safe-haven demand for the USD.
Inflation remains a critical task for central banks, but bringing it down without recking the economy is the real challenge. FED chair Powell testified before Congress last week, adding that a soft landing from hawkish interest rate hikes was now at risk. He hinted that a recession could be the answer to starving off demand and driving inflation down, the lesser of two evils, perhaps?
ECB President Lagarde will deliver her opening remarks at ECB Forum on Monday evening, which may hint at the ECB’s next steps in terms of interest rates and its general assessment of the Euro Zones’ economic health. This will likely lead to some volitility for EUR.
In more extensive news, Russia has defaulted on over 40 billion dollars of sovereign debt, for the first time since the 1998 Russian financial crash. Although Russia has the money, it has been unable to transfer it due to economic sanctions preventing it from using western banking rails.
G7 leaders are now close to agreeing on a new round of sanctions that will target the Oil price cap and Russian Gold. The USA is also seeking to impose sanctions on Russian defence enterprises to limit their ability to replace lost equipment in Ukraine. Furter escalations in the war will likely turn any bullish sentiment left in the market.
The week ahead has important data docket for the USA and EU, which include the following:
Monday
USD Durable Goods Orders(May)
EUR ECB’s President Lagarde speech
Tuesday
EUR ECB’s President Lagarde speech
Wednesday
USD Gross Domestic Product Annualized(Q1)
USD Fed’s Chair Powell speech
GBP BoE’s Governor Bailey speech
EUR ECB’s President Lagarde speech
Thursday
GBP Gross Domestic Product (QoQ)(Q1)
EUR Unemployment Rate(May)
Friday
GBP S&P Global/CIPS Manufacturing PMI(Jun)
EUR HICP (YoY)(Jun) PREL
USD ISM Manufacturing PMI(Jun)
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