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[Quick Facts]

1. ECB President Lagarde says we will continue to increase rates in July.

2. Positive data eases U.S. recession fears.

3. Russian seaborne crude shipments plunge due to maintenance work.

4. The probability of a 25bp Fed rate hike in July is 76.9%.

[News Details]

ECB President Lagarde says we will continue to increase rates in July

Christine Lagarde, President of the European Central Bank, continued to release hawkish remarks. She said that Eurozone inflation had entered a new phase and might stay there for a while. We will continue to increase rates in July, she added. The central bank is unlikely to announce in the near future that interest rates have reached a peak. Pierre Wunsch, an ECB governing council member, also said that the ECB will suspend interest rate hikes in September on condition that the core CPI falls for the third consecutive time. The ECB has signaled that it will monitor core inflation and expects it to pick up over the summer, supporting market expectations of two rate hikes of 25 basis points each.

Positive data eases U.S. recession fears

Data showed that U.S. new orders for durable goods unexpectedly increased by 1.7% in May compared to April, and the Conference Board Consumer Confidence Index recorded 109.7 in June, a new high since January 2022, beating expectations of 104. Annual total U.S. new home sales in May recorded 763,000 units, a new high since February 2022, higher than the expected 675,000 units. The upbeat economic data eased investors' concerns that the Federal Reserve's sharp interest rate hike will trigger a recession. Biden also said the U.S. economy is very strong and he does not think a recession will occur.

Russian seaborne crude shipments plunge due to maintenance work

The flow of Russian crude oil to international markets plunged last week. It was most likely due to maintenance work, not production cuts. Data show that Russian seaborne crude shipments averaged 2.55 million barrels per day in the past week ended June 25, well below the 3.53 million bpd in the previous week. Russian seaborne crude shipments averaged 3.39 million bpd in the past four weeks ended June 25, also below the 3.65 million bpd recorded last week. Russia had said earlier that the decline in seaborne crude oil exports due to production cuts would target ports in the Baltic and Black Seas. However, seaborne crude oil exports from the Baltic Sea's Ust-Luga port and the Black Sea's Novorossiysk port showed no signs of significant decline. Meanwhile, crude processing rates at Russian refineries rose to the highest level since April in the week ended June 21. And the country's downstream maintenance is coming to an end.

The probability of a 25bp Fed rate hike in July is 76.9%

According to the CME FedWatch Tool, the probability of the Fed keeping interest rates unchanged at 5.00%-5.25% in July is 23.1%, and the probability of raising rates by 25 basis points to the 5.25%-5.50% range is 76.9%; the probability of keeping rates unchanged by September is 18.7%, the probability of raising rates by a total of 25 basis points is 66.7%, and the probability of a cumulative 50 basis point rate hike is 14.6%.

[Focus of the Day]

UTC+8 9:30 Australia CPI YoY (Not SA) (May)

UTC+8 14:00 Germany Gfk Consumer Confidence Index (SA) (Jul)

UTC+8 16:00 Switzerland ZEW Investor Confidence Index (Jun)

UTC+8 21:30 Federal Reserve Chairman Jerome Powell is invited to participate in a policy panel discussion at the ECB Central Banking Forum

UTC+8 22:30 U.S. EIA Crude Stocks for the Week Ended June 23 (M barrels)

Next day TBD The Federal Reserve releases annual bank stress test results