The US Dollar has strengthened further overnight after a continued standoff in negotiations surrounding the debt ceiling in The States. The current debt limit is $31.4 Trillion and concerns have been raised that a recession could be looming large in The US if no agreement can be reached. There is of course some hope that a deal can be reached, otherwise a US recession would more than likely have a knock-on effect globally. Most notably in The UK, which in turn would strengthen the demand for the safe- haven Dollar.
Sticking with The US, Federal Reserve Chairman Jerome Powell is set to speak tomorrow, with markets expecting more hints on their monetary policy for their upcoming meeting in June. Up until now, analysts have believed The Federal Reserve will pause it’s rate-hiking cycle next month, but will inflation levels still inflated, some Federal Reserve officials have been quite hawkish regarding potentially one more hike.
Elevated inflation also remains a concern in Europe as well, with their figures released yesterday coming in at 7%, mainly due to a rise in prices for Services and Energy costs. Markets are currently anticipating that The ECB will raise their interest rates by a further 50 basis points over the course of the summer, however this will still be at least 1% behind The Federal Reserve and potentially The Bank of England so it will be worth keeping an eye on how this develops over the coming weeks.
We end the week tomorrow with a fairly quiet day regarding economic data, instead with a few speeches from both Federal Reserve & ECB policy makers, although it’s expected that the ongoing negotiations for The US debt ceiling will continue to be the main driving force on the markets for the next few days.