Three Hawkish Central Bankers' Speeches Amid Uncertainty

Can current nervous market sentiment handle three hawkish central bankers’ speeches in one day at a time of heightened economic uncertainty?

We’ll find out because Federal Reserve Chairman Jerome Powell, Bank of England Governor Andrew Bailey and ECB President Christine Lagarde all make speeches this afternoon. The speeches could calm fears on the assurance that central bankers have a plan to handle inflation, trigger more bearish sentiment because of recession fears, or do both at the same time, depending on the context.

Key rhetoric in Q2

The ECB is ‘determined’ to ‘stamp out’ inflation in a ‘sustained’ way.

The Federal Reserve is ‘focused’ on taming inflation.

Bank of England: policy makers ‘must take the actions needed’ to return inflation to normal levels.

As expected, Christine Lagarde’s speech yesterday signaled that Europe’s central bank will act in a ‘determined and sustained’ way to tame inflation, raising expectations that there will be a hike in its key interest rate at the next meeting on July 21. In doing so, the ECB joined the central bank hawks in the UK and US, with a likely impact on the EURUSD and EURGBP in the short-to-medium term.

So far this year, the EUR has been weaker against the USD, reflecting the divergence between monetary policy in the US and Eurozone. This may change in the third quarter, depending on the size of the ECB’s interest rate increase and developments from the side of the Federal Reserve.

In other trading news, the US releases its Q1 annualised GDP results, expected at the level of 1.5 percent. Germany’s preliminary annual harmonised CPI numbers are also out today, expected to have risen from 8.7 percent previously to 8.8 percent in June. As inflation is a hot metric in the current economy, any surprises in Germany’s CPI figures may move the EUR crosses.

Finally, China releases data early tomorrow morning. The NBS Manufacturing PMI for June is expected to be unchanged at 49.6, still technically in negative growth territory. The non-manufacturing PMI for June is expected at the level of 52.5, rising from 47.8 in May. China’s growth expectations are a key influence on crude oil prices, and any unexpected developments could move the energy markets.

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