Previously, Federal Reserve Chairman Jerome Powell told traders at Jackson Hole that the Fed is committed to hiking interest rates and fighting inflation until it “gets the job done”. Last week, financial markets appeared to take that warning seriously.
Forex
Source: Bloomberg. Click to see full size.
For the second consecutive week, the EUR/USD pair oscillated near parity, volatile but unable to find direction, and ended the week at $0.9954. Despite sluggish growth, US macroeconomic indicators indicate economic progress is continuing, easing some of the Federal Reserve’s burden. Even though the Fed acknowledged that its macroeconomic policy negatively affects household and business expenses, it reaffirmed its commitment to taming inflation.
According to EU policymakers, the European Central Bank (ECB) is likely to tighten the monetary policy more aggressively, leading traders to increase the odds of an ECB rate hike to 75 basis points in September. This news led to a spike in government bond rates, while bond prices fell throughout Europe.
Meanwhile, on the GBP/USD front, the bleak UK economic picture continued to weigh on the native currency along with the escalating energy and cost-of-living crises.
This week, ECB officials will hold their monetary policy meeting, and traders will finally learn whether the ECB has leaned towards managing inflation or protecting fragile growth. Also, something to look forward to would be the US Federal Reserve Chair Jerome Powell’s remarks.
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Commodities
Source: Bloomberg. Click to see full size.
Despite closing the week in red, gold found some relief on Friday, 2 September 2022. The yellow metal recovered most of its previous day’s losses but replicated its lowest level in the last 2 months. The spot prices reached new daily highs on Friday to close the week above the $1,700 level.
The dollar-denominated commodity found some strength due to 2 factors. First, the US dollar dropped from a two-decade high ahead of the closely watched US jobs report. Second, the mild drop in US Treasury bond yields after the release of the non-farm payrolls report further helped support its growth.
Gold crossed just above its resistance level of $1,710 at the end of the week, making this price the new support level. With the next Fed Reserve’s rate decision less than 3 weeks away, traders await the outcome as the US dollar will be impacted, exerting upward or downward pressure on gold.
Meanwhile, silver prices reversed from their lowest prices since July 2020 to reach $18.00 ahead of the US non-farm payroll results, snapping out of a five-day downtrend. Traders are on edge for any surprises that could renew the US dollar run-up and hurt the XAG/USD.
Cryptocurrencies
Source: Bloomberg. Click to see full size.
A tough week for the cryptocurrency market ended with major coins in the red. Following the Fed Chair’s hawkish comments, traders seem to consider how rising borrowing rates will affect riskier assets.
Last week, Bitcoin prices kept hovering around the $20,000 level, with somewhat volatile jumps and dips that resemble an (ECG) electrocardiogram result. The average Bitcoin price last week was $20,001.72, which indicates that there was almost equal movement above and below the mean level.
Having said that, at the time of writing, Bitcoin was trading at $19,905.52 and had stayed below the $20,000 mark throughout the weekend.
Meanwhile, other cryptocurrencies continued to be in turmoil. Litecoin, Dogecoin, Cardano, and Dash have all experienced continued losses in the past month, except for a spike in mid-August.
Ethereum was the stand-out performer last week and is trading slightly below the $1,600 level. Its continued surge can be attributed to the anticipation of an upgrade to its blockchain software.
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US stock markets
|
Name of the index |
Friday’s close |
*Net change |
*Net change (%) |
|
Dow Jones Industrial Avg (Wall Street 30) |
31,318.44 |
-964.96 |
-2.99% |
|
Nasdaq (US Tech 100) |
12,098.44 |
-506.73 |
-4.02% |
|
S&P 500 (US 500) |
3,924.26 |
-133.40 |
-3.29% |
Source: Bloomberg
*Net change and net change (%) are based on the weekly closing price change from Friday to Friday.
Equity markets fell despite a remarkably stable jobs report on Friday, 2 September 2022. The Dow declined by 3% for the week, while the Nasdaq fell by over 4%. S&P 500 prices fell by 3.3% for the week and 8.3% over the last 3 weeks.
Based on the Bureau of Labor Statistics’ non-farm payrolls report published on Friday, 2 September 2022, the US economy added 315,000 jobs in August. The figure was just above the Dow Jones’ consensus estimate of 295,000, and the unemployment rate rose to 3.7%, slightly above their expectations of 3.5%.
While many traders said the jobs report was encouraging, the data also made them wary of the Fed’s outlook for the future. Traders remain concerned about the path of rate increases, and many fear aggressive rate tightening by the central bank may lead to a recession.
This week, Apple will be hosting its annual product launch event on Wednesday, 7 September 2022, followed by Fed Chair Powell’s remarks regarding the future monetary policy on Thursday, 8 September 2022.
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