Risk appetite remains low as traders fear that the central bankers’ aggression will lead to a slowing of economic growth. Adding to the bitter sentiment were geopolitical and trade-linked worries surrounding Russia and China.
Fed Chairman Jerome Powell mostly repeated his latest pledge to battle inflation with readiness to announce another 0.75% rate hike if needed. The Fed Boss also praised the US economic strength and helped the US dollar to remain firmer.
ECB President Christine Lagarde, suggested chances of a stronger rate increase in September while also expecting positive growth rates. However, ECB Chief Economist Philip Lane warned about a double-sided risk of higher inflation for longer and an upcoming recession, in an interview with CNBC on Tuesday.
It should be noted that the risk-aversion wave drowned Wall Street and the US Treasury yields while fueling the US Dollar Index.
Looking forward, the German Retail Sales for May, expected -2.0% versus -0.4% prior, will lead the Fed’s preferred version of inflation, namely Core PCE Price Index, for May, expected to rise to 0.4% from 0.3% MoM. Given the fears of economic slowdown, a stronger data of inflation-linked data could weigh on the pair.
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