Markets gauge central banks monetary policies path

On Monday, the dollar eased back from the 20-year high it reached earlier this month, following disappointing economic data from the United States, which might dampen expectations for more rapid Federal Reserve rate hikes. 

In the intervening period, market participants have still been concerned about the trade-off between managing inflation and avoiding a hard landing. Even though ongoing debates will continue over whether long-term yields have peaked, we do not expect 10-year yields to drop below 3% in a material or sustained manner in the near future.

Major European currencies appreciated against the dollar. Before this week's European Central Bank forum in Portugal, GBP/USD gained by 0.12% to $1.2278, while EUR/USD rose by 0.05% to $1.0559.

Sintra forum

On Monday, Portugal's Sintra will host a three-day meeting of the European Central Bank against the backdrop of fears that measures to combat the most substantial inflation rise in decades may tip global economic activities into recession.

Investors are expected to closely watch Wednesday's panel discussion with Lagarde, Powell, and Bailey for insights on how the central bank heads view the trade-off between curbing inflation and ensuring a soft landing for the global economy. The conference's theme will be "challenges for monetary policy in a rapidly changing world." ECB officials' comments will also be closely monitored for further details on a planned anti-fragmentation tool.

As the first half of an exceptionally turbulent year draws to a close, we look ahead to the second half. It is unclear whether the next six months will bring some respite or a greater degree of volatility. Highlights of this week's economic calendar include the PCE price index - a gauge of inflation closely watched by the Fed - along with Eurozone inflation figures and Chinese PMI data.

Events of today

Today's core durable goods orders are closely watched by investors. Today's number is expected to continue to fall to 0.3% in May from 0.4% in April. 

Investors will also be watching pending home sales in May, which is forecast to print another dismal record, contracting 4% in May. It is almost in range, with a 3.9% decline in April.