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This Week: Dollar Index (DXY) set to cool further?

Volatility remains high with risky assets subject to the ongoing push-pull between the aggressive pace of tightening adopted by many global central banks to rein in inflationary pressures, and whether this comes at the expense of economic growth.

With the dreaded “r” word (recession) seemingly everywhere, such dreaded thoughts will weigh on the market’s collective mind when interpreting the economic data and events due the days ahead:

Monday, June 27

  • CNH: China May industrial profits
  • US crude: EIA weekly US crude inventories (delayed from last week)

Tuesday, June 28

  • EUR: Germany July consumer confidence
  • GBP: BOE Deputy Governor Jonathan Cunliffe speech
  • USD: San Francisco Fed President Mary Daly speech; US June consumer confidence

Wednesday, June 29

  • JPY: Japan May retail sales, June consumer confidence
  • AUD: Australia May retail sales
  • EUR: Eurozone economic confidence; Germany June inflation
  • ECB panel featuring ECB President Christine Lagarde, Fed Chair Jerome Powell, and BOE Governor Andrew Bailey
  • USD: US 1Q GDP (third print); speeches by Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard
  • US crude: EIA weekly US crude inventories

Thursday, June 30

  • JPY: Japan May industrial production
  • NZD: New Zealand June business confidence
  • CNH: China June PMIs
  • GBP: UK 1Q GDP (final print)
  • EUR: Eurozone May unemployment
  • USD: US weekly initial jobless claims, May personal income/spending, May PCE deflator

Friday, July 1

  • NZD: New Zealand June consumer confidence
  • AUD: Australia June manufacturing PMI
  • JPY: Japan June Tokyo CPI, May jobless rate, Tankan Large Manufacturing index
  • CNH: China June Caixin manufacturing PMI
  • EUR: Eurozone June CPI and manufacturing PMI
  • USD: US June ISM manufacturing, June S&P Global manufacturing PMI

 

Data releases this week should provide more colour regarding the intensity of price rises across the world. Various Eurozone member states report their inflation figures for May with the region’s HICP data set to be released on Friday. Before that, we get to see the Fed’s targeted measure of inflation with last month’s PCE price index.

In his recent testimony, Fed Chair Powell commented that the core PCE number likely held at the same pace as in April. It will be interesting to see what impact rising prices have on spending volumes in the personal spending data released at the same time.

The greenback has been coiling over the last few sessions, holding above a previous long-term top from January 2017 on the DXY.

Ironically, hawkish comments from Fed officials and the “unconditional” commitment to bring inflation down has seen more than a quarter point of tightening priced out by money markets. Traders watching the US 10-year Treasury yield will keep one eye out for the 3% level if this trend continues. If yield support has peaked for the dollar, the recent high in the DXY at 105.56 may be tough to beat.

This Week: Dollar Index (DXY) set to cool further?

 

This week, investors will also keep a close watch on the ECB’s Sintra forum.

The Fed has the Jackson Hole symposium, while the European equivalent holds its own central bank pow-wow in Portugal. The three-day shindig should be interesting given the inflation surge, rising rates and worries about an imminent global slowdown.

ECB comments by President Lagarde will be scoured for any details around the planned new anti-fragmentation tool.

Grab the popcorn on Wednesday as Fed Chair Powell and Bank of England’s Bailey are on a panel with Lagarde, which could trigger more price action for the benchmark US dollar index (DXY), noting that the euro and the British Pound combine to make up almost 70% of DXY.

 

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