NAGA Weekly Recap | June 19 — June 23 — 2023

Were you prepared for the Bank of England's unexpected decision to hike the interest rate by 50 basis points this week? This pivotal move rippled through various markets. However, it wasn't the only notable development. The sudden surge in Bitcoin's value and the downturn in US stocks might also take you by surprise.

Explore our recap for comprehensive coverage of this week's crucial economic events!

Bank of England hikes interest rates to 5% in surprise move

The Bank of England (BoE) raised its main interest rate from 4.5% to 5%, the highest since 2008, in response to indicators of persistently high inflation, which was revealed to be taking longer to decrease than previously expected.

Critics of the move, including MPC members Silvana Tenreyro and Swati Dhingra, argued that the effects of previous tightening were still unfolding, and predicted future declines in inflation and wage growth. Despite this, the BoE remains committed to its mandate of maintaining inflation at the 2% target in the medium term, as reiterated by Governor Andrew Bailey.

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Stock futures pointed lower, as a wave of hawkish central-bank hikes dampened spirits

Stock futures dipped as hawkish central-bank hikes globally caused unease ahead of Jerome Powell's continuing testimony to Congress. S&P 500 futures fell by 0.29%, Dow Jones futures dropped by over 100 points, or 0.31%, and Nasdaq futures lost 0.42%.

The downward trend follows Powell hinting at potential future rate increases and comes after the Bank of England's significant rate increase to 5%. Earlier the same day, both Norway and Switzerland also raised their rates, adding to the worldwide focus on combating inflation.

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The global crypto market skyrockets as Bitcoin price surpasses $30,000

Bitcoin, the world's largest cryptocurrency, has driven a surge in the global crypto market with a significant price increase that pushed it past the $30,000 mark. This upturn, leading to nearly a 10% rise for Bitcoin and a 9.5% increase in global crypto market value, is largely attributed to BlackRock's recent filing for a Bitcoin Exchange Traded Fund (ETF), shifting the sentiment around the asset from uncertainty to optimism.

Other developments, including similar ETF applications by Invesco and strategic actions by WisdomTree and Deutsche Bank, have further buoyed the market, attracting over $100 billion in capital as of June 21, 2023, and signaling a changing industry perception of digital assets.

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Pound of Sterling: pump-and-dump reaction seen vs. Euro and US Dollar

The British Pound experienced a temporary surge in response to the Bank of England's unexpected 50bp rate hike, but soon fell under selling pressures, causing it to lose its initial gains against both the Euro and US Dollar.

The Pound to Euro exchange rate rose to 1.1653 but soon pared the advance by retreating to 1.1585. The Pound to Dollar exchange rate spiked to 1.283 before retracing to 1.2764.

The market reaction suggests that maintaining the previous 25bp hike increments could have led to even more sustained selling pressure on the Pound.

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This concludes our weekly recap. Have a great weekend and see you next week! 👋