Forex

The US dollar index rose to a multi-decade high of $109.3 in July as investors focused on soaring inflation and the extremely hawkish Federal Reserve. Data published by the US showed that the unemployment rate remained at 3.7% in June while inflation soared to the highest level in over 40 years. As a result, the Federal Reserve decided to hike interest rates by 0.75% for the second straight month. The US dollar then eased towards the end of the month on signs of softening inflation, with gasoline and food prices dropping.

The euro dropped below parity for the first time in over two decades as concerns about the health of Europe’s economy continued. Russia slashed gas supplies to the region to about 20% of capacity, pushing European leaders to ration gas usage. Meanwhile, with inflation rising, the European Central Bank (ECB) decided to hike interest rates by 0.75%.

Most central banks decided to hike interest rates in July. The Reserve Bank of Australia (RBA), Bank of Canada (BoC), and Reserve Bank of New Zealand (RBNZ) raised rates as inflation continued rising.

Commodities

Commodity prices had a tough time in July as investors continued worrying about the strength of the economy. The Bloomberg Commodity Index dropped by more than 14% from its highest point during the month.

Crude oil dropped below $100 for the first time in months after the meeting between Joe Biden and Saudi’s Mohammed bin Salman. In a statement, Saudi said that it will stick with supply targets set by OPEC+. The country has also reiterated that it does not have a lot of supply capacity.

Meanwhile, European’s natural gas prices surged as Russia continued cutting supplies to the region. Gazprom, the leading gas company, slashed supplies to Europe by 20% and Latvia to 0. There are concerns that Russia will completely cut production ahead of the winter season.

Other commodities that struggled in July were copper, lumber, iron ore, and food items like wheat and corn.

Indices

Global indices gave a strong performance in July. In fact, American indices like the Nasdaq 100, Dow Jones, and Nasdaq 100 had their best month since 2020. This strong performance was triggered by investors who were buying the dip.

Further, companies announced earnings that were weaker than expected. According to FactSet, companies in the S&P 500 index had their slowest earnings growth since 2020.

Other global indices like the German DAX, France CAC 40, and the broader Stoxx 40 indices had a strong month. The same trend happened in Asia, where the Hang Seng, Shanghai, and Nikkei 225 did well.

Some of the top companies that were in the spotlight in July were Twitter, Amazon, and oil supermajors. Twitter sued Elon Musk for ending his acquisition while Amazon moved deeper into healthcare by acquiring One Medical. Oil supermajors like Chevron, Exxon, and Shell published robust earnings helped by the soaring oil and gas prices.

Economic Events

August will be a relatively calm month in the markets since most central banks will not deliver their quarterly results. The only major central banks that will publish their results will be the RBA, BoE, and RBNZ. Economists expect that the three central banks will hike rates by 0.50%. The Fed, ECB, and Bank of Japan will deliver their next rate decisions in September. The other key event in August will be the continuation of corporate earnings.