Forex

The US dollar continued its bullish momentum in July as the Fed continued its hawkish tone. The bank decided to hike interest rates by 0.75%, the biggest increase in decades. In subsequent statements, Jerome Powell warned that the bank will continue hiking rates in the coming months. The rate hike happened as data showed that the country’s inflation surged to the highest level in over 40 years. The dollar also surged as the fear and greed index dropped.

The Swiss franc jumped sharply as investors reacted to the hawkish interest rate decision by the Swiss National Bank (SNB). The bank surprised investors when it decided to deliver its first interest rate hike in more than a decade. It cited the need to fight inflation, which is still below 3%.

Meanwhile, the euro continued its downward trend after the ECB maintained its interest rate unchanged. It also announced that it would end its asset purchases program. But in an urgent meeting, the bank decided to re-introduce some asset purchases in its bid to cushion high-risk countries like Spain and Italy.

Commodities

Commodity prices were mixed in June after soaring sharply in the previous months. The Bloomberg Commodity Index dropped from a monthly high of $132 to a low of $119. While some commodities remained at elevated levels, prices of most commodities dropped.

The price of crude oil ranged between $108 and $120 in June as Russia continued to lower its supply to the European Union. India and China are buying cheap oil from the country at record levels. Further, the price of natural gas dropped to the lowest point since April after signs emerged that the Freeport LNG plant was set to reopen. Other commodities that dropped in June were silver, copper, and gold.

Indices

Global indices continued their downward trend in June as concerns about margins and rate hikes continued. The Dow Jones dropped by almost 7% while the Nasdaq 100 fell by almost 10%. It tested the lowest level since November 2020 as the tech sell-off continued. The same trend happened in Europe, where the FTSE 100 and DAX index dropped to the lowest level in months.

The market is worried about the rising risks of a recession as central bank hikes interest rates. A survey by the Wall Street Journal said that analysts have a 40% possibility of a recession this year. There are also concerns about the strength of the US dollar. More companies, including, Microsoft announced that the strong dollar will likely hit their earnings.

Economic Events

July will be an important month for the market as companies publish their third-quarter results. Investors will focus on quarterly revenue growth, impacts of the strong US dollar, and margin expansion. The other important economic events will be from central banks. Economists expect that the Federal Reserve will hike interest by 75 basis points while the ECB will exit negative interest rates. Other important central banks to watch will be the Bank of England, Bank of Canada, and the Reserve Bank of Australia.