Global markets remain volatile following the hawkish comments from the central bank chiefs during the European Central Bank's (ECB) annual forum in Portugal. The central bankers have warned that the era of low-interest rates and moderate inflation has come to an end.
FED chair Jerome Powell just said at the ECB Forum, there is a risk that the US central bank's interest rate hikes will slow the economy too much, but the bigger risk is persistent inflation. Powell repeated his latest pledge to battle inflation with readiness to announce another 0.75% rate hike if needed.
“I don’t think we are going to go back to that environment of low inflation,” European Central Bank President Christine Lagarde told the ECB’s annual forum in Portugal. While she hopes that in the medium term, the inflation rate will level off at the two percent target set by the central bank.
Bank of England Governor Bailey said the British monetary authority would not need to act forcefully to bring down inflation. Bailey mentioned he was “not shocked” as “the UK economic system is weakening greater than others”.
US futures extended the decline on Thursday morning. On Wednesday, Wall Street ended lower driven by weaker-than-expected US GDP data and hawkish comments from FED chair Powell. Meanwhile, Chinese shares traded higher on Thursday after China’s factory activity expanded for the first time in four months. The latest data showed that China’s manufacturing purchasing managers’ index (PMI) rose to 50.2 in June from 49.6 in May, the first expansion since February.
Crude oil futures struggling to regain the upside momentum following the previous session's bearish move. The oil prices ended lower on Wednesday despite the release of better-than-expected EIA crude inventory data. The EIA data showed a 2.8-million-barrel draw from crude oil inventories.
In the currency market, the EURUSD came under heavy selling pressure and fell to a fresh weekly low on Thursday after the US dollar index climbs above the key resistance 105. The strong bearish sentiment was fueled by hawkish comments from Christian Lagarde and increasing Eurozone recession fears.
The precious metal hovers near the weekly lows ahead of the U.S. core PCE release later today which is traditionally the Fed’s preferred measure of gauging inflation. The overall momentum remains bearish for this whole month driven by central banks’ aggressive action.
On the data front, Germany reported weaker-than-expected employment reports. Unemployment Change in Germany increased to 133 thousand in June from -4 Thousand in May of 2022. The unemployment rate in Germany increased by 5.3% in June from 5% in May.
Moving ahead today, the important events to watch:
US – Jobless claims: GMT – 12.30
US – PCE price index: GMT – 12.30
Canada – GDP: GMT – 12.30
Worldwide, more than 543 million people have been confirmed infected and more than 6.3 million have died. The United States has confirmed over 86.9 million cases and has had more than 1015,200 deaths from COVID-19, the highest total in the world.
Technical Outlook and Review
EURUSD: For today, If the bearish momentum continues then the downside upside level is to watch at 1.0400 and 1.0375. On the other hand, the next immediate resistance prevails at 1.0500, a break above 1.0500 can lead the pair towards 1.0640 levels.
The important levels to watch for today: Support- 1.0400 and 1.0375 Resistance- 1.0460 and 1.0500.
GOLD: On the daily time frame, the gold is currently supported at $1800, and the resistance is around $1822. On the upper side, the long-term buyers should wait for a daily close above the $1840.
The important levels to watch for today: Support- 1800 and 1795 Resistance- 1822 and 1835.
Quote of the day - “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” - Warren Buffett.