This was a week where the market continued to move in light of Powell’s recent insistence that two more rate hikes from the Fed are likely. This kept stocks pressured for the first half of the week, and month-end and half-year flows meant traders were reluctant to commit to new positions. Also, with the ECB’s and the Fed’s preferred inflation prints out on Friday, there has been a sense of “wait and see” regarding how much more aggression will be needed from both central banks. Many are waiting to see how aggressively both central banks will adjust their rate strategies in response to these latest inflation prints.

Other key events from the past week

  • EUR: German IFO miss. June 26: German IFO Business Climate data came in at 89.5 this week, below the market’s minimum expectations and the second consecutive fall. Does this mean that Europe’s hoped-for recovery has stalled?
  • EUR: ECB and its bond portfolio: The ECB is increasingly moving to a more hawkish stance, and that trend further increased this week with Bloomberg sources reports. Some ECB officials are considering a fast reduction of the ECB’s bond portfolio. If they do this, can the EURGBP gain on this hawkish ECB move?
  • USD: Powell at the Sintra Conference, June 28: Powell said there was a strong majority for two more rate hikes in the last Dot Plot. Powell repeated that the Fed’s target is inflation. US Core PCE will be a key focus for the Fed this Friday.

Key events for the coming week

  • AUD: RBA interest rate decision, July 4: Next week the RBA meets, and short-term interest rates see a 32% chance of another 25 bps hike. Will the RBA surprise markets again with another hike, or have they reached the terminal rate now?
  • Seasonal Insights: Patterson Companies seasonals have a strong summer. For a free trial with Seasonax to find seasonal patterns in commodities, currencies, and stocks, contact your account manager and get started right away!
  • USD: US labor data, July 7: Next week, US labor data will be released, and markets will be looking for more evidence of a slowing US economy. If the labor market shows strong signs of weakness, then the market will likely welcome that as a disinflationary sign. Click here for more information.

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