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Weekly Market News

Hello traders,

This week has news that we should keep our eyes on.

High inflation remains the main headline in the financial markets as all the investors and traders have seen a bloodbath on the world markets on friday due inflation that jumped to 8.6% in May, the highest since 1981. A lot of money flow went into safe-heaven assets such as GOLD, JPY, USD.

US500 closed down 2.96% on friday showing a real panic selling in the markets.

We are oficially in a bear market as US500 is down more than 20% from the ATH.

  •  USD – US Dollar Index closed bullish on friday +0.85% and it’s currently around 104.189 the rise on friday confirms that the big money went into safe-heaven assets such as us government bonds withdrawing the money from the stock market.
  •  Federal Reserve is expected to raise interest rates more sharply next week (as inflation rose more than expected), this will be the main event for the next week with a high focus from investors, traders.

Although interest rates rise and are a factor in reducing commodities, it’s inflation that is rising anyway, and it’s more important for people here to maintain purchasing power.

  •  GOLD has always been a good shield against inflation, on friday gold rised 1.28% and confirmed that this is a real hedge against inflation, 1871 close price on friday. Financial analysts expect gold to rise above 2000 if central banks will fail regardings getting lower inflation.
  •  EURO – ECB Policy Decision

Now, let’s look at what we already know.

📊 We heard from ECB Chief Economist Philip Lane last week where he pointed toward a 25bps hike in July followed by another 25bps in September. As we know, the neutral rate for the ECB sits in the range between 1-2%, current rates are sitting at negative 50bps.

During the ECB Meeting last week European Central Bank President Lagarde had a hawkish tone saying: “If the September forecast inflation of 2024 at 2.1 percent or higher, the rate increase will be more than 0.25 percent”.

ECB Keeps Main Refinancing Rate Unchanged At 0.0%, As Expected.

EURGBP closed positive 0.43% on friday and EURUSD closed negative -0.92%

  •  AUD – RBA Hikes Rates

📊 The RBA is another central bank that is known to adopt Yield Curve Control as a tool to support monetary policy. The RBA in March 2020 that it would buy bonds in unlimited quantities in order to cap the three-year yield at the overnight cash rate. The aim of yield curve control is to stimulate the economy when short-term interest rates are already at zero.

📊 However, in the case of the RBA governor Phillipe Lowe said it would be unlikely for the central bank to adopt the policy again due to their experience post the Covid crisis.

RBA surprise markets with an outsized hike of 50bps taking rates to 0.85% vs 0.65% expected.

  • JPY – 20 year low

The Japanese yen continues to lose ground. USD/JPY touched the 133 line this week, as the yen hit a 20-year low.

The second factor weighing on the yen is the Bank of Japan’s ultra-accommodative policy. BoJ Governor Kuroda said on Monday that monetary tightening was “not suitable” and that the central bank would maintain its ultra-loose policy until the Bank achieved its inflation target of 2.0%. The BoJ has been quick to intervene to defend its yield curve, purchasing JGBs in order to cap yields on 10-year bonds at 0.25%.

” The Bank will persistently continue with the current powerful monetary easing centered on yield curve control. —said Kuroda from BOJ.

We wish you all the best in your trading and be careful around news.

Happy Trading!

Team Fidelcrest.

Fidelcrest is a prop firm that provides funding for traders worldwide with up to $1,000,000 in capital. Traders can start receiving profit split payouts during the Verification Stage (Step 2).

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