Fed’s Powell, ECB’s Lagarde & BOE’s Bailey All to Speak Today

USD is back in action as US stocks drop on recessionary concerns. Three central bank leaders speaking today, plenty of volatility expected following hawkish comments from Lagarde yesterday. Risk sentiment weaker on Wednesday, leading safe-haven FX higher. Commodities weaker also amidst fresh USD rally. 

Key Factors for Today

• USD reverses higher on US economic fears
• Risk sentiment weakens on recession concerns
• Powell, Lagarde & Bailey speak today
• Hawkish comments from Lagarde yesterday
• Safe-Havens leading in FX, AUD the weakest 
• Commodities muted amidst USD upturn

Coming Up 

• USD US GDP q/q final
• USD Fed’s Powell speaks
• EUR ECB’s Lagarde speaks

USD Rebounds as Consumer Confidence Plunges

It was a volatile session for the US Dollar yesterday. The greenback was seen trading higher initially as the focus stayed on positive risk sentiment, extending from last week. However, this theme quickly reversed in response to US consumer confidence which was seen plunging last month. A weaker-than-expected Richmond manufacturing index release added to glib outlook for the US economy. The US Dollar was seen rallying on safe-haven demand despite concerns over the impact Fed tightening is having on the economy. Today we’ll receive final quarterly US GDP figures as well as hearing from Fed’s Mester before headline comments from Fed’s Powell. 

Risk Sentiment Rocked by Recession Fears

It's been a tricky start for equities traders on Wednesday. Overnight we saw the Nikkei and ASX both heading lower. US stocks have also come under fresh pressure amidst the uptick in the US Dollar. In the UK, however, the FTSE remains strong this week, buoyed by a weaker Pound. News that China has further loosened its COVID restrictions is adding some support for risk sentiment, though the broader focus remains on the US Dollar rally. 

Safe-Havens Leading FX

In FX, USD is leading the way today closely followed by the other safe-havens, CHF and JPY. The reversal in risk appetite into the middle of the week has fuelled a shift in recent dynamics with risk-linked currencies taking a backseat across the European open on Wednesday. AUD has been the weakest performer so far today consequently. Along with Fed’s Powell, we’ll also hear from ECB’s Lagarde & BOE’s Bailey today. 

Hawkish Comments from ECB’s Lagarde

In comments yesterday, Lagarde warned that the ECB would be nimble in its approach to raising rates. The ECB chief noted that while a 25bps hike was the base-case scenario for July, the ECB is willing to do more if necessary if inflation continues to soar. These comments have now raised hawkish risks going into the July meeting. 

Gold & Silver Weaken 

Metals are trailing lower today. The resurgence in USD yesterday has added fresh downside pressure for both gold and silver. With the US Dollar likely to continue higher today on comments from Powell, both metals appear vulnerable to further downside. 

Oil Softens Ahead of OPEC Meeting

Oil prices have softened a little today, pausing as the US Dollar attracts fresh demand. Crude futures are still up on the week following a strong reversal off last week’s lows. Today, the focus will be on the OPEC meeting underway. Following an agreement last month to increase production beyond the typical monthly increases, further increases this month look unlikely and should therefore keep oil prices underpinned on the back of the meeting.