Markets are still digesting the 75BP hike delivered by the Federal Reserve last week. Some Fed members hinted that another 75BP is on the table in July’s meeting. While those hikes are necessary to tame high inflation levels, fears of a possible recession are growing. This could be the focus of the congress committee questions to Chairman Powell in his testimony this week.

Major indices in the US and Europe lost between 3% and 5% of their value last week as the odds of stagflation continue to grow. Meanwhile, the US Dollar is holding ground supported by market pricing for a Fed rate of 3.5% by the end of 2022. Oil prices fell by 7% on Friday on fears of a decline in demand caused by a possible US recession grew.
 

Economic data highlights

Monday 20^th of June

• US Holiday- Juneteenth
• ECB President Lagarde Speaks

Tuesday 21 of June

• CAD Retail Sales
• US Home Sales
• FMOC member Mester speaks

Wednesday 22 of June

• GBP CPI (inflation)
• CAD CPI
• Fed Chair Powell Testifies

Thursday 23 of June

• EUR – Initial PMI June (Industrial & Services)
• GBP– Initial PMI June (Industrial & Services)
• US – Initial PMI June (Industrial & Services)
• Fed Chair Powell Testifies

Friday 24 of June

• GBP – Retail Sales
• CAD – Manufacturing Sales
• US – Michigan Consumer Expectations

There is not much data at the start of the week because of a US holiday, therefore investors will be following the ECB President Lagarde’s speech to find out about any details related to the Central bank’s new tool to fight “Fragmentation” in the Eurozone.
 

CPI Numbers

The UK and Canada inflation figures for May will be released this week and while the UK numbers are expected to grow from 9.0% to 9.1%, the Canadian figures are forecasted to drop from 5.7% to 5.4%. Central banks (BOC and BOE) are expected to follow the Fed’s steps in hiking rates aggressively should CPI numbers in both economies continue to increase.
 

Fed Chairman Testimony

 
Markets will tune in to the Fed Chairman’s Powell testimony before Congress on Wednesday and Thursday to seek more clarity about the central bank’s stance. Will the rapid tightening in monetary policy cause a recession in the US economy and how long the committee may wait to change its policy again are the main points of discussion.
 

PMI Numbers

 
Markets will be waiting for primary PMI numbers for June from the US, UK, and the Eurozone on Thursday to catch a glimpse of the economic performance of these economies, knowing that factors like the supply chain disruptions, high raw material prices and tightening monetary policies are affecting those numbers negatively. The US PMI numbers are forecasted to retreat from 57.0 to 56.4, the same for the Eurozone from 54.6 to 53.9, while the UK numbers are expected to stabilize at 54.6.