Focus remains on tighter policy

Edward Bell - Senior Director, Market Economics
Published Date: 21 June 2022


  • Economic data to start the week was limited with the US out for a public holiday. Markets, however, continue to reel from the implication of the sharp hawkish turn underway from central banks virtually across the board and in particular the FOMC’s 75bps hike. FOMC voting member James Bullard, chief of the St Louis Fed, made public comments yesterday where he asserted that if a repeat of 1994’s tightening cycle – the last time such a large hike was made – then the Fed could set up a ‘stellar’ economy. However, he warned that inflation expectations could become ‘unmoored without credible Fed action.’
  • One of the major notable exceptions to the hawkish turn is China, where the PBOC kept loan prime rates unchanged at 4.45% on the five-year tenor.
  • European Central Bank President Christine Lagarde said she was committed to hiking rates even as markets oscillate in response to the hawkish turn. Lagarde said that the ECB had to be “absolutely certain that our monetary policy stance” affects all member economies even at the risk of spreads widening for economies like Italy.
  • Bahrain realised real GDP growth of 5.5% in Q1 2022, according to the state news agency. The non-oil economy expanded 7.8%.

Today’s Economic Data and Events

  • 16:30 US Chicago Fed activity index May: forecast 0.47
  • 16:30 CA Retail sales m/m Apr: forecast 0.8%
  • 18:00 US Existing home sales May: forecast 5.4m

Fixed Income

  • US Treasury markets were closed to start the week thanks to a US public holiday. However, on the open today they have started weaker with 10yr yields up 7bps to 3.298%. European bonds were generally weaker overnight with 10yr bund yields adding 9bps to 1.743% and the 10yr gilt yield up 11bps to 2.6%.


  • The US dollar was generally weaker against peers in the absence of any major fundamental catalyst. EURUSD is currently trading back up above the 1.05 handle, adding 0.2% in early trade today while GBPUSD is up by 0.11% to 1.2266. USDJPY is holding relatively stable at around 135.
  • Commodity currencies strengthened somewhat with USDCAD moving back below the 1.30 level, trading now at 1.2955 while AUDUSD gained over much of the day, briefly pushing up to 0.7 overnight before easing off.


  • While US markets were closed, there were mixed results elsewhere yesterday. In Asia, markets remained under pressure and the Nikkei lost -0.7% while the Shanghai Composite closed flat.
  • Major European equity markets saw some relief yesterday following the sharp sell-offs last week. In Europe, the CAC added 0.6%, a relative laggard as the parliamentary elections there delivered more uncertainty, but the DAX gained 1.1% and the FTSE 100 added 1.5%.
  • In the region, the Tadawul gained 0.6% but the ADX (-1.1%) and the DFM (-1.6%) both closed lower.


  • Oil prices were roughly flat overnight as there were few data points to push the market one way or another. Brent futures are currently up by more than 1.3% to USD 115.63/b while WTI has added more than 2% to USD 111.88/b. Libya’s energy minister said the country’s oil production has recovered back to around 700k b/d from about 100k b/d in a recent low caused by protests. 

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