Written by Noreen Burke
Investing.com – Federal Reserve Chairman Jerome will be in the spotlight again this week when he testifies before Congress following the largest rate hike by the US central bank since 1994. The market will be following Powell’s comments along with those of several Fed officials. Other Feds who will be speaking during the week, closely watch as markets try to gauge the size of the rate hike expected at the upcoming July Fed meeting. The US economic calendar is not crowded, but updates on the health of the housing market will be in focus amid signs of a rapid lull. European Central Bank President Christine Lagarde will appear before the European Parliament on Monday and will face questions about the bank’s new anti-crisis tool. Meanwhile, it appears that stock market volatility will continue along with the . Here’s what you need to know to start your week.
Powell is due to testify before Congress in hearings on Wednesday and Thursday and is expected to reiterate the Fed’s commitment to reining in inflation, which is at a 40-year high.
The Fed said on Friday that its commitment to fighting inflation was “unconditional”. The annual US inflation rate rose in May at the fastest pace since 1981.
The Federal Reserve raised interest rates by 75 basis points last Wednesday and indicated a faster pace of rate hikes going forward. Powell stated that the Fed cannot control all of the factors that contribute to high inflation, such as the war in Ukraine that has driven up energy prices.
Market participants fear that the Fed’s rate hike path threatens to push the economy into recession, and with signs of slowing growth and US stocks now in bear market territory, Powell may be pressed for more details on how the Fed could The Federal Reserve curbed inflation without causing too much turmoil in the economy and markets.
European Central Bank President Christine will testify before the European Parliament in Brussels on Monday and is likely to be questioned closely about the progress made in the bank’s new crisis-fighting tools since they were announced last week.
The European Central Bank is laying out plans for a new purchasing scheme aimed at combating “fragmentation”, or the widening gap between the borrowing costs paid by Germany and the more indebted countries around the region such as Italy, Spain and Greece.
Government borrowing costs in the periphery of the Eurozone have risen since the European Central Bank announced plans earlier this month to raise interest rates to tackle inflation that is currently four times the ECB’s 2% target.
With markets now pricing in a 25 basis point interest rate hike by the European Central Bank in July and at least one 50 basis point hike by September, some analysts believe the new tool could allow the central bank to implement more aggressive rate hikes if needed.
US economic data
The economic calendar will be unencumbered next week with major updates to the health of the housing sector. Existing home sales data on Tuesday is expected to show a slowdown in May as mortgage rates continue to rise. The US is to publish data on new home sales on Friday with markets looking for signs of a rebound after May’s 16.6% drop.
Also, initial jobless claims data is due on Thursday after last week’s numbers indicated some calm in the labor market although conditions remain volatile. Preliminary data on manufacturing and services sector activity is also due on Thursday.
Meanwhile, several Federal Reserve officials including James Bullard, Thomas Barkin, Charles Evans and Patrick Harker are scheduled to appear during the week.
stock market volatility
Each of Wall Street’s three major indexes declined for a third consecutive week last week, weighed down by concerns about the growing possibility of a recession as the Federal Reserve and other global central banks attempt to stamp out inflation.
The benchmark 500 index is also down about 23% year-to-date and recently confirmed that the bear market started on January 3. It is also about to confirm its bear market.
Megan Hornemann, director of portfolio strategy at Ferdence Capital Advisors in Hunt Valley, Maryland, told Reuters, “Right now, you’re going to see a lot of volatility and it’s mainly due to the fact that the Fed is going to be carrying all these price hikes and just trying to gauge the inflation picture. It is a very dark picture at the moment.
And “we just have to anticipate the volatility, it is here to stay, and it will remain here until we get more clarity on whether we have really reached peak inflation or not.”
US markets will also be closed on Monday mid-June.
It was trading at around $19,571 on Sunday after dropping to $17,593 on Saturday – its weakest level since December 2020.
Bitcoin has lost about 60% of its value this year, while Ethereum, backed by Ethereum’s rival cryptocurrency, is down 74%. In 2021, the Bitcoin price peaked at more than 68,000.
“The break of $20,000 shows you that confidence has collapsed in the crypto industry and that you see the recent pressures,” Edward Moya, chief market analyst at Oanda Corporation, told Reuters on Saturday.
“Even the loudest crypto-fans from the big rally are now silent. They are still bullish on the long-term but they are not saying this is the time to buy the dip,” Moya said.
The cryptocurrency sector has been hit by increasing signs of industry stress after the collapse of the Terra Blockchain platform last month. Earlier this month, the lender Celsius froze withdrawals and transfers between accounts, while crypto companies began laying off employees. And the hedge fund Crypto Three Arrows Capital said last week that it incurred significant losses.
This trajectory has coincided with a sell-off in stocks that may challenge investor confidence in the cryptocurrency industry.
–Reuters contributed to this report