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Financial markets started the week in risk-off mode and negative sentiment prevailed after the US had reported soaring inflation in May to a multi-decade high. Market participants are looking for a potential 75 bps rate hike as the US Federal Reserve meets this week.
Economic Data:
The economic calendar remained empty, which exacerbated risk-related trading.
Other Developments:
The EUR/USD pair trades near the 1.0400 level, while the GBP/USD pair bottomed at a 2-year low of 1.2106, holding near-by at the time being. Commodity-linked currencies also collapsed. AUD/USD trades around 0.6920, while USD/CAD soared to 1.2890. The USD/JPY pair closed the day with a third consecutive doji at around 134.30.
Gold edged lower, with XAU/USD now changing hands at around $1,823 a troy ounce. Crude oil prices continued to advance, with WTI now trading at $120.70 a barrel.
The yield on the US 10-year Treasury note finished the day at 3.37% after peaking at 3.44%, its highest since before the pandemic.
Wall Street remained pressured while heading into the close, with the three major indexes settling at their lowest since last January.
The US Federal Reserve will be the first but not the only central bank to announce its monetary policy decision. The Switzerland National Bank, the Bank of England and the Bank of Japan will also announce their decisions in the upcoming days.
If the US Federal Reserve steps up its bet, it won’t take long until the rest follow such a lead. In the meantime, financial markets will see the decision as mounting concerns about a possible recession, which will translate into more panic selling.
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