Market news – Week 1, August 2022

Financial markets experienced a triple whammy of data last week, which included the July Federal Reserve’s rate decision, the second-quarter’s Gross Domestic Product (GDP) reading, and the better-than-expected earnings results of the large-cap tech giants.

Forex

EUR/USD finished last week at around the $1.0220 mark. While it lost ground for the second month in a row, it is still much higher than its multi-decade low of $0.9951 in mid-July. Besides usual recession fears, the US Federal Reserve's latest monetary policy decision also propelled the pair forward.

While the US dollar continued to weaken globally, GBP/USD gained for the second consecutive week. A combination of tepid optimism failing to boost the US dollar and better-than-expected preliminary UK S&P Global Purchasing Managers' Index reports prompted some to predict a 50 basis point Bank of England rate hike in August, which further strengthened the pair. A less hawkish Fed outcome, coupled with slowing economic activity, supported the majors' uptrend after the world's most powerful central bank abandoned forward guidance. As expected, the Fed raised its key policy rates by 75 basis points to 2.25% – 2.50%.

The macroeconomic data is quite light for this week. However, the focus will be on the Bank of England's interest rate decision and the US Non-farm Payrolls scheduled on Thursday, 4 August 2022 and Friday, 5 August 2022, respectively.

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Commodities

Last week, gold saw its biggest weekly gain since early March. As seen in the chart above, the yellow metal's prices went up by 2.2%, closing the week at around $1,765.94. 

Speculation that the Federal Reserve may delay the pace of interest rate hikes as the US economy weakens led to gold's big jump. Additionally, the recent decline in the US Treasury yields and better stock market prices seemed to put pressure on the US dollar, which benefited the price of gold. 

The gold market was tested by a few macroeconomic factors, such as the US ISM Manufacturing, Non-Manufacturing Purchasing Managers' Index (PMI), and the US Non-farm Payrolls (NFP).

Meanwhile, oil prices rose for the week but fell short of their highs due to traders focusing on this week's OPEC+ meeting, which is expected to disappoint US expectations for a supply increase.

Cryptocurrencies

The cryptocurrency market saw some sustained positive action for the second consecutive week, with leading coins making significant gains. Overall, the market held its ground regardless of the Fed announcing another interest rate hike. 

Despite the stronger-than-expected contraction in the US GDP, Bitcoin surged past $24,000 for the first time since mid-June. 

On Saturday, 30 July 2022, the largest cryptocurrency by market capitalisation breached the $24,500 mark before receding to the sub-$24,000 range. At the time of writing, Bitcoin’s price is at $23,809.72, on course to converge with its SMA 5 and SMA 10 at $23,787.9 and $23,779.74, respectively.

Meanwhile, Ethereum experienced an even greater rally and continued to be the top performer, gaining by over 16%. 

Among the top 20 cryptocurrencies, the prices of Cardano, Polkadot, Polygon, and Uniswap rose by 11%, 20%, 14%, and 30%, respectively. 

On Friday, 29 July 2022, the global cryptocurrency market capitalisation rose sharply to touch $1.10 trillion, and the total trading volume was at $107.69 billion. 

The overall consumer sentiment in the market is getting better. As a result, major retailers are taking notice of changing consumer behaviour. Despite it sounding unbelievable, almost 75% of retailers from various industries across the US are expected to accept cryptocurrency or stablecoin payments soon.

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US stock markets

*Net change and net change (%) are based on the weekly closing price change from Friday to Friday.

Stocks surged on Friday, 29 July 2022, posting solid weekly gains and their best monthly performance since 2020. The Dow Jones gained by 2.97%, while the S&P 500 climbed by 4.26%, and the Nasdaq rose by 4.45%.

For the month, the tech-driven Nasdaq gained by 12.35%, making July its best month ever. The main reason for this was the strong earnings from Apple and Amazon, which rose by 3.3% and 10.4%, respectively, on Friday, 29 July 2022. This month also saw the Dow climb by 6.7% and the S&P 500 rise by 9.1%.

Although the Federal Reserve increased rates by 75 basis points earlier in the week and the second quarter Gross Domestic Product reported a decline, the markets were up. This optimism was because the Fed announced an expected slowdown in the pace of its interest rate hikes (as signs emerged that inflation is cooling down), and more than half of S&P 500 companies posted better-than-expected earnings.

This week, the government will release several vital reports on jobs that could affect the Fed’s next policy moves.

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