Global financial markets moved diligently to price in the latest action from the Federal Reserve last week when Mr. Powell’s FOMC[1] raised the US benchmark rate by 75-basis-points. The jumbo rate hike tempered inflation expectations, and perhaps returned some credibility to the institution. However, the impact on equity markets was undeniably bearish. The Dow Jones Industrial Average[2] (DJIA) fell over 4% to its lowest level since November 2020.
The US Dollar[3] benefited from the safe-haven flows despite an immediate reaction to the downside. The DXY index was up around 0.50% going into the weekend. However, there are technical signs across major crosses, such as EUR/USD[4], GBP/USD[5], AUD/USD[6] and USD/CAD[7], that show the Dollar’s ascent is perhaps at or near a critical juncture. The Bank of England remained in a relatively dovish stance, hiking its benchmark rate by 0.25%. The Dollar advanced against the Pound[8], but trimmed some of those gains in the second halve of the week.
Oil[9] prices plummeted on Friday as traders baked in growing fears over a Fed-induced recession. That comes amid the summer driving season, which typically sees higher demand for fuels persist into the fall months. Natural gas[10] prices found relief in the United States after an LNG terminal suffered a catastrophic failure, likely to take months to repair. European prices, however, skyrocketed. The development is likely to keep prices in Europe elevated, further complicating Europe’s inflation outlook.
Speaking of energy prices, Canada is set to report inflation data for May on Wednesday. The country’s consumer price index (CPI) is expected to cross the wires at 7.5% on a year-over-year basis. That would
