What to watch for on Thursday, June 23:
The dollar finished Wednesday against most major rivals, although the decline was limited. Most of the major pairs remain within known levels, with limited volatility.
The main event of the day was US Federal Reserve Chairman Powell’s testimony before Congress. Powell began his speech by stating that the central bank is firmly committed to reducing inflation and that current interest rate hikes will remain adequate. At the end of the event, he added that they would never take any rate hike size off the table, regardless that higher interest rates are likely to be painful and could cause a recession.
The concern about inflation and possible recessions remains the same. Inflation in the UK reached 9.1% year-on-year in May, the highest level in the last 40 years, while the Canadian Consumer Price Index soared 7.7%, the highest in the last 39 years. It is not just about the US, but about a global scenario, the result of the pandemic. However, the risk of a recession in the US is growing and the one that worries the financial markets the most.
Meanwhile, ongoing tensions in Ukraine are exacerbating commodity and food prices. German Chancellor Olaf Scholz diminished the chances of a peaceful solution by pointing out that Russian President Vladimir Putin continues to believe in a dictated peace.
Different officials from the US Federal Reserve were on the microphones, but they did not add anything new to what the markets already know. A rate hike of 75 basis points is on the table for July, while inflation is likely to remain high throughout 2023.
The EUR/USD pair advanced for the third day in a row, but remained below the 1.0600 threshold. GBP/USD briefly advanced above 1.2300 but ended the day around 1.2260. The safe-haven Swiss franc appreciated against the dollar, while USD/JPY consolidated and traded around 136.10.
Commodity-linked currencies posted modest losses against the dollar, recovering from their early declines, while US indices managed to hold up, ending the day mixed around their opening levels. Asian and European indices, on the other hand, closed in the red.
US Treasury yields fell amid recession fears, with the 10-year Treasury yield currently at 3.14%.
Gold advanced earlier in the day but found sellers again around the $1,850 area and ended the day around $1,838 a troy ounce. Crude prices remained at the lower end of their weekly range, with WTI settling at $105.50 a barrel.
Source: Fx Street
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