What to watch for on Thursday, June 16:
Central banks are in the eye of the storm amid stubborn global inflation. The US Federal Reserve was the star of the day. The central bank raised rates by 75 basis points, the biggest hike since 1994, but ruled out the possibility of a 100 basis point hike. Fed Chairman Powell said the current rate of hikes is adequate and could be 50 or 75 basis points at the next meeting, adding that they are “getting ahead”.
Overall, Powell managed to cool market fears. US government bond yields fell sharply, with the 10-year Treasury yield now standing at 3.29%. Wall Street, meanwhile, managed to end the day with gains. The Nasdaq Composite was the best performer, rising 2.5%, while the DJIA added 1% and the S&P 500 recovered 1.46%.
US policy makers revised PCE inflation to 5.2% for this year, from 4.3% previously. It is also seen at 2.6% in 2023 and 2.2% in 2024. On the other hand, growth for this year has been revised down to 1.7% from 2.8% previously.
Earlier in the day, the European Central Bank called an emergency meeting. The ECB decided that it would apply flexibility in the reinvestment of refunds due in the portfolio of the emergency purchase program (PEPP), concerned about the sale of bonds in recent days.
Likewise, the Japanese Prime Minister, Fumio Kishida, indicated that he expects the Bank of Japan to continue striving to meet the price target. The Bank of Japan will hold a monetary policy meeting at the end of the week.
Meanwhile, the EU has announced new legal action against the UK government over its plans to scrap parts of the Northern Ireland Protocol. The UK sought to change the trade, tax and governance arrangements that disrupted trade in the kingdom. British Prime Minister’s spokesman Boris Johnson said afterwards that the UK is disappointed that the EU has taken legal action over the Brexit deal.
The EUR/USD pair bottomed out at 1.0358 and ended the day around 1.0450. GBP/USD was also able to recover and settled at the 1.2170 area. Commodity-linked currencies managed to gain against the dollar amid gains in stocks. AUD/USD is trading around 0.7000, while USD/CAD is hovering around 1.2900. The USD/JPY pair, for its part, presses the base of its latest range, trading at 133.70.
Gold closed the day with gains of $1,834 a troy ounce, while crude oil prices continued to slide. A barrel of WTI is now trading at $116.00.
Source: Fx Street
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