FX News

FX Update: Inflation Causes Recession Fears

Key Points:

• US Holiday Monday (Memorial Day) made for thin markets

• US President Biden meets with Prime Minister Ardern today
• Soaring inflation forecasts and the war on Ukraine is threatening to throw world economies into a disastrous recession
• US Consumer confidence 106.4 vs 103.98 predicted
• The Bank of Canada interest rate decision is tomorrow morning with a 50-point hike already priced in. Markets are anticipating another 50 points at the July 13 meeting but pulled back on expectations the cash rate will be as high as 2.8% at year-end due to ongoing rapid declines in house prices
• Markets are now predicting a 115-point rise to the ECB interest rate by the end of the year with a 50-point hike at their July meeting with headline inflation passing 8.0% recently
• German unemployment -4k vs -16k expected
• Russia has cut off gas supplies to the Netherlands
• France prelim CPI jumps higher to 5.2% vs 5.0% y/y expected
• Crude Oil climbs to a 12-week high of $118.00 after the EU agrees to ban Russian oil imports
• The Canadian Dollar (CAD) is the strongest currency this week with the Japanese Yen (JPY) the weakest.
• Japan May consumer confidence 34.1 vs 33.0

Major Announcements last week:
German IFO Business climate 93.0 vs 91.5
RBNZ Official Cash Rate 2.0% was 1.5%
US Prelim GDP -1.5% vs -1.3%
Canadian Retail Sales 0.0% vs 1.5%
US Consimer Sentiment 58.4 vs 59.1
ECB CPI y/y 8.1% – expected 7.7%

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