Futures indices on rising ahead of US housing data
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Futures indices on rising ahead of US housing data

On Tuesday, the European indices are likely to continue their gains from Monday. This is because investors seek bargains after last week's heavy losses caused by global central banks tightening their monetary policies. The recent drop in equity markets and shift in investors' attitudes make a bottoming thesis more difficult to make. 

The RBA's June meeting minutes, in which the central bank raised rates by a larger than anticipated 50 basis points, revealed concern over inflation earlier in the session. Following RBA Governor Philip Lowe's remarks that much more policy tightening is to come, the Aussie strengthened against the dollar. 

He also played down the likelihood of rates rising by large 75 basis points and disputed the notion that rates could reach as high as 4% by year's end. Lowe said price pressures continued to rise both globally and domestically, and inflation was now expected to get 7% by the end of the year, up from a prior forecast of 6%. It would represent the highest rate in decades and significantly above the RBA's long-term target range of 2%-3%.

The Australian dollar and the euro were also supported by broadly higher risk sentiment across markets, with US equity futures up over 1%. However, in the longer term, the currency's trajectory is more influenced by the global economic outlook, which turned out to be unfavourable for the Aussie.

Events of today

Jerome Powell, the Chair of the Federal Reserve, will testify before Congress Wednesday and Thursday. His appearance comes after the central bank recently raised interest rates by approximately three-quarters of a percentage point.

On Tuesday, investors will monitor incoming data, including existing home sales, to gauge the economy's health. As the Fed battles inflation at 41-year highs, recent data showing low consumer confidence, falling retail spending, and a cooling housing market have fueled recession fears.