The Euro weakened below 1.025%, the lowest level in 20 years, and is on the verge of hitting dollar parity on growing concerns Russia may cut off gas supply to Europe and plunge the region into recession, which in turn would make it more difficult for the ECB to tighten monetary policy. The key pipeline Nord Stream 1 is set to shut for maintenance on July 11-21 and may not return to full capacity, threatening the bloc's objectives to fill 80% of storage capacity before winter. The annual inflation rate in the Euro Area increased to a new record high of 8.6% in June of 2022, once again above market expectations. ECB President Lagarde said she believes it is unlikely that the Eurozone will return to an environment with low inflation while confirming a 25bps rate hike in July after multiple ECB policymakers called for a steeper increase. Conversely, the Federal Reserve is expected to continue with fast rate hikes and raise the fed funds rate either by 50bps or 75bps this month.

Retail sales in the Euro Area edged 0.2% higher in May over April 2022, rebounding from a 1.4% drop in the previous period, but missing market forecasts of a 0.4% rise. Sales of food, drinks and tobacco dropped 0.3%, after a 2.3% slump in April, as rising consumer prices weigh on consumers' affordability. Sales of auto fuel and online shopping also fell by 0.2% each. On the other hand, sales of non-food products increased 1.2%, reversing a 1.2% fall in April. Year-on-year, retail sales also increased 0.2%.

WTI crude futures bounced back above $100 per barrel on Wednesday after dropping more than 8% to close below the key level in the previous session, as mounting fears that a recession will hurt demand were balanced by persistent supply concerns. Analysts also attributed Wednesday’s bounce on short-covering and bargain hunting. Highlighting supply tightness, OPEC Secretary General Mohammad Barkindo said Tuesday the oil industry was “under siege” due to years of underinvestment, and added that shortages could be eased if extra supplies from Iran and Venezuela were allowed. Meanwhile, oil prices have been declining since mid-June as concerns about a potential recession rattled financial markets. Citibank said oil prices could tumble to $65 a barrel by the end of year if an ”increasingly likely” recession hits the global economy.

Natural gas prices in Europe fell from a 5-month high, with TFF futures falling to around 155 euros a megawatt-hour after Norway’s oil and gas unions agreed to put a stop to the strike, calming nerves about a significant reduction in the Scandinavian country's gas output and shortages in Europe. Also, the German government is preparing to rescue energy companies buckling under the cost of soaring gas import prices. Germany has already enacted the second stage of its emergency gas plan, which includes tighter monitoring of the market and the reactivation of coal-fired plants. Russia diminished gas flows through its biggest Nord Stream pipeline by 60% and the link is scheduled for a full shutdown next week for maintenance.

Malaysian palm oil futures extended losses to below the MYR 4,000-per-tonne level, the lowest level since July 2021 as supply is outpacing demand. Top palm oil producer Indonesia increased its export quota and it now allows palm oil producers to export seven times the amount it sold domestically, up from previously five times, to reduce high domestic inventories. Indonesia has recently announced an export acceleration scheme to ship at least 1 million tonnes of crude palm oil and derivatives and also reduced the maximum export tax rate and levy for crude palm oil to $488 per tonne from $575 per tonne to boost shipments. At the same time, in Malaysia, the production is expected to increase in the months ahead on higher crops and as migrant workers return. Malaysia's palm oil inventories at the end-June likely climbed to their highest levels in seven months, as exports for June fell between 10% and 13.4% from the same period in May, according to cargo surveyors.

Factory orders in Germany edged up 0.1% month-over-month in May of 2022, the first albeit small rise in four months, and beating market forecasts of a 0.6% drop. The gain was driven by major orders and excluding those, orders fell 0.9%. Foreign orders rose 1.3%, led by those from countries outside the Euro Area (3.7%) while those from the EA fell 2.4% and domestic ones continued to decline (-1.5%). Orders increased for capital goods (3.3%) but went down for intermediate goods (-3.2%) and consumer goods (-4.5%). “Enterprises still have difficulties completing their orders as supply chains are interrupted because of the war in Ukraine and distortions persist that have been caused by the Covid-19 crisis”, according to the statistical office.