Global financial markets rose in price last week during the last action of the Federal Reserve last week, when FOMC Mr. Powell raised the US benchmark to 75 basis points. The large rate hike undermined inflation expectations and could restore some institutional credibility. However, the impact on stock markets is undoubtedly bearish. The Dow Jones Industrial Average (DJIA) fell 4% to its lowest level since November 2020.
The US dollar benefited from safe havens despite an immediate adverse reaction. The DXY index rose 0.50% over the weekend. However, there are technical indicators of major crosses such as EUR / USD, GBP / USD, AUD / USD and USD / CAD, suggesting that dollar growth may be at or close to a critical point. The Bank of England maintained a relatively bearish stance and raised the benchmark to 0.25%. The dollar improved against the pound, but lost some gains in the second half of the week.
Oil prices fell on Friday as traders raised growing concerns about the Fed’s recession. This occurs in the middle of the summer driving season, with often higher demand for fuel continuing in the autumn months. Gas prices have found relief in the United States after the LNG terminal suffered a catastrophic failure that is likely to take months to repair. However, European prices are rising. Growth is likely to continue to drive prices up in Europe, further complicating inflation outlook in Europe.
Speaking of energy prices, Canada will announce inflation data for May on Wednesday. The domestic consumer price index (CPI) is expected to exceed yarns by 7.5% year on year. This is an increase from 6.8% y / y in April. The warmer-than-expected press is likely to encourage the already aggressive betting on Bank of Canada rate hikes, which could potentially strengthen the Canadian dollar.
Japan will also release inflation data for May. The Bank of Japan last week remained firm in its sleepy stance on a market that seemingly sought to enforce BoJ policies. It did not happen. The mantra “don’t fight the boat keeper” seems appropriate for the Bank of Japan. It only fell against the dollar last week, although many losses began to cool. Warmer-than-expected CPI printing from Japan could see a decline in USD / JPY.