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Weekly Market Review #1

Within the tradable week, the market sees certain industries perform well and others decline. However, this week was unique and marked the first time in 40 years that all investment categories simultaneously declined. Normally when the stock market declines, another market would see higher demand, normally the bond market. However, yesterday the market witnessed a declining market amongst stocks, cryptocurrencies, bonds and the US Dollar. This indicates that investors were simply not interested or lacked confidence in the investment market in general, this can also potentially trigger high volatility over the coming days. 01.07.2022.jpg Yesterday the market evaluated the release of the latest economic data from the US economy. The main release was the PCE Price Index which was slightly lower than expected and maintained an increase of 0.3%. The US also saw the unemployment claims remain the same as the previous month as expected, however, the index confirming the level of savings declined to a 4-month low.

This week the Bank of England, European Central Bank and Federal Reserve all took part in a joint forum to discuss global inflation, monetary policy and their views on the current economic outlook. The Head of the Federal Reserve made comments after the forum which gave confidence to the market regarding interest rates but also doubts regarding the economy. Mr Powell advised that the Fed will not allow price increases to remain high in the longer term, and also expressed his hope that the regulator will be able to bring inflation closer to its target without significantly harming economic growth. The risk of a recession, according to Powell, is possible but also advised that high inflation would be a much lower risk in the longer term.

The Eurozone also came under a lot of pressure this week with the currency seeing a 1% decline against its main competitors in less than 48 hours. The price witnessed pressure after the speech made by the ECB earlier this week. The market also slightly lost confidence in interest rate hikes as Germany confirmed a lower level of inflation. However, according to economists, the general slowdown in inflation was triggered by the introduction of a number of new measures to support the population, in particular travel subsidies. This does not yet mean a significant reduction in inflationary pressure in the short term and interest rate hikes are still predicted for the coming months.

Lastly, the price of oil has also seen a change in trend over the past day and a half. The assets started the week strong seeing a price increase of over 7%, however, the bears have taken control of the market and the price has fully corrected downwards. The downward trend was caused by the latest gasoline inventories which significantly grew indicating a sufficient supply. Also, the data from the Chinese economy disappointed traders, causing concern that the level of economic demand for the asset may not return to the latest highs any time soon. This is something the market will continue monitoring.

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