Continued fears of global recession subdue markets
Investor sentiment across financial markets was holding a mixed tone yesterday. Over the past few days, in his semi-annual testimony to Congress, Fed Chair Powell has noted that raising rates too high too fast could plunge the US economy into recession. He went on to note this is a situation the Fed is trying to avoid, but events around the world have made the “soft-landing” scenario harder to achieve.
PMI data released yesterday for the US and the Eurozone showed that activity slowed by more than anticipated in June. As recession fears have increased, rate hike expectations have been pared back by markets.
In terms of currency volatility though, the markets have been somewhat calm. Of the limited moves to register over the past 24 hours, the euro has been slightly weaker. This is reflected by EUR/USD opening back in the lower half of $1.05-1.06, EUR/GBP is operating just below the 86p handle. Elsewhere, GBP/USD is changing hands above the midpoint of the $1.22-1.23 corridor.
Looking ahead to today’s trading, already this morning, UK consumer confidence (June) and retail sales (May) have been released. Both metrics deteriorated, broadly in line with the consensus. The German Ifo for June and US new home sales for May is also due. However, comments from a number of key central bank officials may hold greater sway on currency markets.