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Even with more data showing high prices remain and signals of a potential recession ahead, broad financial markets were relatively choppy this week and forex was a mixed bag.

The Swiss franc took the top spot once again, continuing last week’s bullish move, while the Japanese yen was the biggest loser as the BOJ keeps loose monetary policy.

Notable News & Economic Updates:

China refrained from cutting interest rates this week despite growing economic challenges

ECB President Lagarde said on Monday that the ECB intends to raise the key interest rate by 25 bps in July and hike again in September

The Russian Ruble soared to a 7-year high on Monday; raised concerns of export competitiveness

Private oil inventory data showed a build up in crude (+5.6M bbl) and gasoline (+1.216M bbl)

U.K. consumer price inflation hit a 40-year high of 9.1% last month

Fed Chair Jerome Powell testified to Congress on Wednesday, reiterating that the Fed is ‘strongly committed’ on inflation & noted that recession is a ‘possibility’

Eurozone growth slowed dramatically in June; flash manufacturing PMI hits a 22-month low at 52.0 in June vs. 54.6 in May

Norwegian central bank raised their policy rate more than expected, 50 bps to 1.25%; forecast another 25 bps hike in August

Intermarket Weekly Recap

Dollar, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay 1-Hour

Dollar, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay 1-Hour

Despite another round of economic updates showing persistent high inflation conditions and sour business and consumer sentiment surveys, price action was calm relative to recent weeks and months across the financial markets.

And it looks like behavior changed a bit this week as bond yields, the U.S. dollar, and oil prices fell, which many argue is a signal that inflation expectations may be shifting and focus may be turning to rising odds of a global recession on the way.

The recession worries didn’t seem to affect equities and crypto assets, both of which seemed to recover despite the lack of any positive macro drivers. Several arguments could be made there, one being  that it was an overdue bounce after weeks of selling pressure.  Let’s recall that since accelerated selling began in April, BTC is down over 55% against the U.S. dollar, while the Nasdaq 100 has shed over 20% of its value.

Another argument could be that the rising odds of recession means traders may start pricing in rising odds that central banks will have to slow their aggressive stance on rate hikes, or possibly even reverse rhetoric if economic a significant economic slowdown does come.

Additionally for crypto, the market likely saw relief from selling pressure this week as we got news that troubled CeFi crypto institutions have been getting help with the recent liquidity issues.

Most notable is Babel Finance (who halted customer withdrawals earlier this week), who reached a debt agreement with counterparties.  And BlockFi, who was offered a $250M emergency line of credit from FTX.

In the forex space, it appears that currencies were a very mixed bag with no sign of uniform price behavior.  The euro and Sterling were both a sideways mess as traders likely had to balance the fast rising odds of recession and record high inflation conditions due to the energy crisis in Europe.

The risk-off vibes seemed to have been the biggest driver for the Aussie and kiwi, and the yen continued to see sell pressure, albeit at a slower pace, due to the monetary policy divergence between the Bank of Japan and the rest of the major central banks.

The Swiss franc took to to spot once again, possibly on a combination risk-off vibes, but more likely continuing to draw in buyers after the recent shift in expectations for interest rates from the Swiss National Bank.  Remember that last week, they surprised the markets with an interest rate hike and rhetoric that and we got more rhetoric this week from SNB Chair Jordan that more tightening may be needed.

USD Pairs

Overlay of USD Pairs: 1-Hour Forex Chart

Overlay of USD Pairs: 1-Hour Forex Chart

Cleveland Federal Reserve Bank President Loretta Mester said it will take 2 years for inflation to hit the Fed’s 2% target

Fed Waller backed another 75 bps hike for July; says recession fear is ‘a bit overblown’

St. Louis Fed President Bullard sees more economic expansion this year

Treasury Chief Yellen urged for less dependence of key supplies from other nations

U.S. Existing Home Sales in May: -3.4% y/y to 5.41M, returning to pre-pandemic levels

Richmond Fed President Thomas Barkin said a 50 or 75 bps hike in July is “reasonable”

U.S. weekly jobless claims ticked lower to 229K in the week ending Jun. 17

U.S. Flash Manufacturing PMI for June: 52.4 vs. 57.0 in May; Services at 51.6 vs. 53.4 in May

Federal Reserve Governor Michelle Bowman supports raising interest rates by 75 bps again in July

GBP Pairs

Overlay of GBP Pairs: 1-Hour Forex Chart

Overlay of GBP Pairs: 1-Hour Forex Chart

U.K House Prices rose by 0.3% to £368,614 June; Rightmove sees price growth slowing in 2H 2022 due to rising rates and increase in inventory

Bank of England policy maker Catherine Mann says the BOE must hike faster to stop pound weakness

U.K. CPI rose by 9.1% y/y in May vs. 9.0% y/y in April

U.K. factory gate prices accelerated from 14.7% to 15.7% y/y in May

U.K. public sector net borrowing down from 21.1B GBP to 13.2B GBP

U.K. flash manufacturing PMI at 53.4 in June vs. 54.6 in May

EUR Pairs

Overlay of EUR Pairs: 1-Hour Forex Chart

Overlay of EUR Pairs: 1-Hour Forex Chart

Germany Producer Prices in May 2022: +33.6% y/y; +1.6% m/m

ECB Governing Council member Martins Kazaks said market volatility is a factor on how the ECB will move

Finnish Governing Council member Olli Rehn hinted on Tuesday that we may see more than 25 bps hike in September

Euro area Current Account: -€6B in April to decrease total surplus down to €182B (down from €316B one year ago)

Euro area consumer confidence fell to -23.6 in June vs. -21.1 in May

French flash manufacturing PMI dropped from 54.6 to 51.0 vs. 53.9 forecast

German flash manufacturing PMI slipped from 54.8 to 52.0 vs. 54.0 consensus

CHF Pairs

Overlay of CHF Pairs: 1-Hour Forex Chart

Overlay of CHF Pairs: 1-Hour Forex Chart

Swiss trade surplus narrowed from 4.03B CHF to 3.12B CHF

Swiss National Bank Chair Jordan said on Wednesday that further monetary policy tightening is likely needed.

SNB Quarterly Bulletin for Q2 2022: SNB expects GDP for 2022 to be around 2.5% but level of uncertainty remains high

CAD Pairs

Overlay of CAD Pairs: 1-Hour Forex Chart

Overlay of CAD Pairs: 1-Hour Forex Chart

Canada Retail Sales: +0.9% m/m in april vs. 0.2% previous

Canada New Housing Price Index: +0.5% m/m in May vs. 0.3% m/m previous

The Canadian inflation rate surged to +7.7% y/y in May vs. +6.8% in April; the highest rate since Jan. 1983

NZD Pairs

Overlay of NZD Pairs: 1-Hour Forex Chart

Overlay of NZD Pairs: 1-Hour Forex Chart

Business NZ services index jumped from 52.2 to 55.2 in May

Global Dairy Prices ticked lower by 1.3% at the latest Global Diary Trade auction

New Zealand Westpac consumer sentiment index down from 92.1 to 78.7

New Zealand trade surplus lowered from NZ$440M to NZ$263M in May

AUD Pairs

Overlay of AUD Pairs: 1-Hour Forex Chart

Overlay of AUD Pairs: 1-Hour Forex Chart

RBA Gov. Lowe: Will discuss 0.25% or 0.50% in July meeting

RBA June meeting minutes: Further interest rate hikes will be needed

Australian flash manufacturing PMI rose from 55.7 to 55.8; Australian flash services PMI down from 53.2 to 52.6

JPY Pairs

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart

The Bank of Japan bought 10.9T yen ($81B) of government bonds last week, the highest ever purchase, pulling yields back lower

Japanese Prime Minister Kishida said on Tuesday that rapid yen weakening is a source of concern

BOJ Meeting Minutes: warnings that excessive FX moves may damage economy, divided on inflation outlook, maintained strong commitment to keeping rates low

Japanese flash manufacturing PMI down from 53.3 to 52.7

Former Japanese Vice Finance Minister for International Affairs Takehiko Nakao, who said current yen weakness is not beneficial to Japanese economy