(Kitco News) - There has been more rate hike talk from yet another ECB governing council member today. This time Chief Economist Lane has hit the wires suggesting that interest rates should be raised "step by step". Speaking on Spanish television he also added that he did not rule out a mild, temporary, and technical recession.
In general, risk sentiment has somewhat improved on Tuesday after the stock market rout last week. The Dax is trading 1.77% higher and gold has picked up from yesterday's lows although the yellow metal is still down 0.17% on the session.
In terms of pricing, eurozone money markets are pricing in a 52% chance of the ECB hiking by 75 bps in September down from 67% on Monday. This was when ECB's Kazaks went on the hawkish offensive and said the September rate hike needed to be big and he was not happy with the lower euro.
Away from the ECB, there has been movement in the U.K. pricing too. Futures markets are showing a 57% chance that the BoE will hike by 50 bps in September and a 43% chance of a 75 bps hike. Much has been said about the U.K. inflation rate in recent times with Goldman Sachs releasing a note suggesting that the reading could reach 20% as a recession is getting close.
Later in the session, Fed's Barkin and Willaims are on the wires so we could get a closer look into the mind of Federal Reserve members but as Jerome Powell suggested last week there seems to be no sign of a slowdown just yet.
