Despite a difficult start to the week, the financial markets took advantage of Friday's session to make up for part of their loss and thus end on a more positive note. However, the publication of inflation figures above expectations for the month of June in the United States (9.1% against 8.8% expected) could suggest the worst, as we had already experienced last month. But the markets, although bearish, resisted this new 40-year high rather well, with a monthly variation in inflation of +1.3% (against +1% the previous month), a record since 2005. In detail , the trend remains in line with the latest figures published. The rise in prices continues in energy and, above all, in services, while prices are tending downwards in goods. If these figures have led investors to anticipate a 100 bps hike in key rates from the Fed for its monetary policy meeting next week (which would be a first in the history of the American institution), the trend was radically reversed at the end of the week. Indeed, several members of the FOMC called for not moving “too radically” key rates. Even James Bullard, considered the most hawkish member of the FOMC, did not push for a 100 bps hike, preferring several “jumbo” 75 bps hikes, although he did revise his Fed funds target upwards at 4% against 3.5% previously. The deflating of fears of an additional tightening of the Fed's monetary policy was, moreover, supported by mixed macroeconomic data. Thus, while retail sales for the month of June came out above expectations (+1% against +0.9% expected and -0.1% the previous month), they remain biased by the increase in prices and are down 0.3% over the month in volume. The gap between retail sales in volume and in value over one year shows two visions of the American economy since the former are down -0.4% while the latter are up by +8.4%. In addition, the drop in long-term inflation expectations of American households in the University of Michigan survey also reassured the markets.
IIn Europe, the coming week promises to be crucial. The ECB, which is holding its monetary policy meeting, must take action on its first rate hike since 2011. While this decision is widely expected, it must on the other hand convince on its “anti-fragmentation” tool in order to limit rate differences between countries. of the euro area. As if the situation were not difficult enough, this is the moment that Mario Draghi, ex-President of the ECB from 2011 to 2019, chose to resign as Chairman of the Council after the boycott of a vote Trusted by the 5 Star Movement, coalition member. Already under pressure, Italy is probably preparing for a new political crisis which it would have done well without.
IIt is also this week that the maintenance operation of the Nord Stream 1 gas pipeline should normally end. A total or partial cut would only increase the pressures on Europe, already largely shorted by the markets.