Fed wants to avert recession but acknowledges that it may happen.
Jerome Powell, the chairman of the Federal Reserve, tried to persuade the public this week that the Fed will raise interest rates quickly and high enough to suppress inflation without restricting credit enough to choke off the economy and trigger a recession.
Powell emphasised that the Fed's primary mission is to control inflation, but he still hopes for a "soft landing." A decrease in inflation and a slowing of growth without causing a recession or excessive unemployment.
Powell reiterated his goal for a so-called "soft landing" at a European Central Bank event in Sintra, Portugal.
The "huge effect" of energy shocks, which are reverberating globally but are felt sharply in Europe due to its reliance on Russian oil and natural gas, was repeated by ECB President Christine Lagarde. She also mentioned Europe's proximity to the Ukraine conflict and how "energy was significantly underestimated" in the bank's inflation forecast.
The European Central Bank said in early June that it will raise its benchmark interest rates by 0.25 percent in July, with more rises scheduled later in the year. On July 1, the bank also plans to terminate its bond-buying stimulus programme.
Today, June 30, 2022, Eurozone Unemployment rate showed decrease in number of unemployed persons. Previous rate was 6.5%. For June it was forecasted to be 6.8%, but actual was 6.6%, which supports planned increase of the ECR rates.
Although most analysts expect interest rates to be raised by the ECB, their indecision and the strengthening dollar are putting pressure on the EURUSD currency pair. The sale is still going on. But if we look at Graph 1, we can see the potential formation of the bottom. If the formed bottom is maintained, it is possible to reverse the price and strengthen the Euro against the dollar. But caution is needed in trading, due to the indecision already mentioned. [a]
Chart 1: EURUSD, January 2020 till now. (Source: tradingview.com)
The content of this material constitutes marketing communication and should not be considered as any type of investment advice and/or investment research and/or a solicitation for any transactions. This material was prepared for informational/educational purposes only and does not imply an obligation to perform investment transactions nor does it guarantee or predict future performance. BCM Begin Capital Markets Cy Ltd and its relevant persons including affiliates, agents, directors, or employees do not guarantee the accuracy, validity, timeliness, or completeness of any information/data provided by third parties and assume no liability for any loss arising from any investment made based on the said information/data.
Overview report prepared by Jozo Perić, financial analyst of CapitalPanda
[a] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
*Past performance is no guarantee of future results.