ECB’s Schnabel: Risks To The Inflation Outlook Are Tilted To The Upside

**THE PATH TOWARDS SUSTAINED PRICE STABILITY REMAINS UNCERTAIN AND FRAUGHT WITH RISKS

**PROFIT MARGINS EXPECTED TO ABSORB RISING LABOUR COSTS

**A MONETARY POLICY STANCE THAT ERRS ON THE SIDE OF DETERMINATION INSURES AGAINST COSTLY POLICY MISTAKES

**RULES SUGGEST THAT THE OPTIMAL INTEREST RATE PATH WOULD HAVE BEEN STEEPER

**THE FACT THAT WE UNDERESTIMATED INFLATION PERSISTENCE LAST YEAR RAISES THE PROBABILITY THAT WE ARE ALSO UNDERESTIMATING INFLATION TODAY

**GIVING MORE WEIGHT TO OBSERVABLE DATA, IN PARTICULAR AT TIMES OF HIGH UNCERTAINTY, CAN IMPROVE THE QUALITY OF POLICY DECISIONS

**THIS MEANS THAT WE NEED TO REMAIN HIGHLY DATA-DEPENDENT AND ERR ON THE SIDE OF DOING TOO MUCH RATHER THAN TOO LITTLE

**RISKS OF BOTH A DE-ANCHORING OF INFLATION EXPECTATIONS AND WEAKER MONETARY POLICY TRANSMISSION SUGGEST THAT THERE IS A LIMIT TO HOW LONG INFLATION CAN STAY ABOVE 2%

**WE THUS NEED TO KEEP RAISING INTEREST RATES UNTIL WE SEE CONVINCING EVIDENCE THAT DEVELOPMENTS IN UNDERLYING INFLATION ARE CONSISTENT WITH A RETURN OF HEADLINE INFLATION TO OUR 2%

**A MONETARY POLICY STANCE THAT ERRS ON THE SIDE OF DETERMINATION “INSURES” AGAINST COSTLY POLICY MISTAKES

This article was written by Ryan Paisey at www.forexlive.com.

**SAYS ANOTHER HIKE IN JULY SEEMS APPROPRIATE AND THEN WE WILL SEE IN SEPTEMBER

**ECB’S LANE SAYS INFLATION WILL COME DOWN FAIRLY QUICKLY IN NEXT COUPLE OF YEARS TO THE ECB’S 2% TARGET

**LANE SAYS ECB NEEDS TO BE DATA-DEPENDENT ABOUT INFLATION OUTLOOK

**LANE SAYS ECB IS LOOKING AT A VARIATY OF MEASURES TO ANALYZE SHOCKS TO PRICES

**SAYS AT THIS POINT WE ARE DATA-DRIVEN, SEPTEMBER IS STILL FAR AWAY

– I can imagine a LOT of people have some STRONG feelings about this!

This article was written by Ryan Paisey at www.forexlive.com.

The Fed last week
made the decision to pause its tightening cycle, settling at a range of
5.00-5.25%. Their reason was the need for additional economic data before
proceeding with further rate hikes. Their objective is to carefully adjust the
level of monetary restraint necessary to reduce inflation to the 2% target without
inflicting excessive hardship on the economy. The Russell 2000 responded
positively the day after the FOMC decision, rallying, but experienced a slight
retracement just before the extended Juneteenth weekend.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the strong
Russell 2000’s rally since the breakout of the 1723-1820 range, has stalled at
the key 1920 resistance zone. If
the price breaks above the level, it will open the door for a rally towards the
2030 resistance. The sellers are likely to lean on this strong level to target
a pullback into the 1820 resistance turned support, while
the buyers may want to wait for a break higher before piling in with more
conviction.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the last tap
into the 1920 resistance was diverging with the
MACD. This is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see just a pullback as long as the
disinflationary trend continues and the labour market doesn’t weaken too much.

Russell 2000 Technical Analysis
– 1 hour Timeframe

On the 1 hour chart, we can see that from
a risk management perspective, the buyers would be better off to lean on the
support area at 1860 where we can find a previous swing low level and the 38.2%
Fibonacci
retracement level of the entire rally into the 1920
resistance. The sellers, on the other hand, will pile in even more aggressively
if the price breaks below that support zone to extend the selloff into the 1820
support.

There’s not much economic
data to be released this week; however, we will hear from various
Fed members, including Fed Chair Powell, who will testify before Congress on
both Wednesday and Thursday. As the week progresses, we will also get the US Jobless
Claims report on Thursday, followed by the US PMIs on Friday.

This article was written by FL Contributors at www.forexlive.com.

The Swiss National Bank will raise interest rates by 25 basis points on June 22, defying market expectations for a larger move, according to economists polled by Reuters who said the bigger risk was rates will peak higher than they expect.

An overwhelming majority of economists, 30 of 33, polled June 15-19 said the SNB will raise its key policy rate by 25 basis points to 1.75%, less than the 50 basis points it delivered in March

„We think the SNB will deliver another 25bp hike in June, with a risk for 50bp…and, while still data dependent, this is probably the last hike in this cycle,“ noted Ruben Segura-Cayuela, head of Europe economics research at BofA

This article was written by Ryan Paisey at www.forexlive.com.

The squeeeeeeeze on UK yields continues.

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**UK 2-YEAR GILT YIELDS RISE TO 5% FOR FIRST TIME SINCE 2008, UP 7 BASIS POINTS ON DAY

**UK INTEREST RATE SWAPS SHOW GREATER THAN 50% CHANCE OF BOE RATES REACHING 6% BY FEB 2024

This article was written by Ryan Paisey at www.forexlive.com.