Lagarde signals summer hikes

The week has started on a positive note, with investors having another stab at buying the dip following a further wave of selling in recent sessions.

The S&P 500 joining the Nasdaq in bear market territory naturally has everyone wondering whether the market has bottomed. It’s not been the best year for dip buyers but equity markets are now trading at such a discount from their highs that it’s natural for investors to be asking the question.

The economic headwinds remain a major concern though and while a lot of the pessimism is now priced in, there may be a few more surprises on the inflation front. Recessions are being discussed as a far more realistic prospect and if inflation falls at a more gradual pace than anticipated, it could take a further toll on equity markets.

Lagarde breaks with policy of ambiguity

In a highly unusual move, ECB President Christine Lagarde has gone into great detail about plans for interest rates at the coming meetings in a blog post. From a policy of ambiguity to effectively telling the world when interest rates will rise and how much, it’s quite the strategy shift from Lagarde.

Liftoff will come in July and the central bank will exit negative rates by the end of September as the central bank looks to get to grips with inflation which is now running at almost four times its target. The blog post generated quite the response in the markets with the euro more than 1% higher on the day against the dollar.

Treading water

Bitcoin is continuing to tread water around USD 30,000 where it has traded over the last couple of weeks. The shift from interest rates to the economy as a driver of sentiment in the markets has come at a good time for bitcoin, which was suffering under the strain of monetary tightening. The worst may not be over for cryptos though as central banks continue to fight back against rapidly rising prices.

For a look at all of today’s economic events, check out our economic calendar:

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam