High inflation - More Hawkish FED - Slowing Economy
14 June 2022
High inflation - More Hawkish FED - Slowing Economy (Recession? Stagflation?) Although the CPI data was the most critical data of the past week, its effect is clearly felt this week with a large-scale turbulence in the global financial markets. Behind the panic, of course, high inflation, the fear that the FED will become even more aggressive by hardening its monetary policy in parallel with this, and as a result the economies will face the risk of recession (recession), cause large losses in all asset classes except the dollar. The storm could last until tomorrow evening. If it will end on Wednesday evening, we shall see with the text of the meeting, the rate hike path and President Powell's statements. High inflation data, of course, raises recession concerns. It reduces risk appetite, pushes up the US currency and US bond yields. USD adds strength to its power. -The rise in US bond yields pushes up the bond yields of other countries. Ascension is spreading globally. -Stock markets are falling, led by the US stock markets. The decline is spreading globally. -Precious metals are suppressed. - Yesterday's winner was US Dollar
Market expects the FED to raise interest rates by a minimum of 50 bps tomorrow night. Even an increase of 75 bps is in the crucible (25% priced). Higher than expected inflation data may force the FED to be more hawkish is the thinking behind. The S&P500 index, in which the largest 500 companies are traded, fell by 4% overnight, entering a bear market with a drop of 22.50% from its January peak of 4,800 points. With the acceleration in the decline in technology stocks, the Nasdaq index decreased by 4.7% yesterday.The Dollar Index is at 105.20 and the US 10-year bond yield is at 3.38%.
While the price of oil per barrel continued to be traded just below the critical technical level of $123, DXY quickly rose above $105 with the demand for the safe-haven dollar, reaching its highest value since 2003. With the dollar crushing all assets, the GBPUSD parity is again 1.21; The EURUSD parity, on the other hand, eased to the 1.04 level. In the case of a weekly close below the 1.2080 level on the sterling front, we need to underline that the charts are empty until the 1.14 level tested in the covid period.
In the risk-on period (that is, the risk appetite is high with plenty of money and low interests), cryptocurrencies took the first place in the damage assessment list with the panic sales experienced in the last weeks. Programmable coin Ethereum has continued its relentless decline for the past 10 weeks, losing 70% of its value from $3,580 to the edge of $1,000 this week. Similarly, Bitcoin, the coin of resistance, failed to maintain the support level at $28,000, similarly dropping to $21,000, testing its lowest level since December 2020. In technical terms, we will pay attention to the level of 19 thousand dollars even lower.
After losses of up to 20% on a daily basis in cryptocurrencies, the total value of the crypto money market fell below the level of 1 trillion dollars, according to coinmarketcap data. As it will be remembered, in the last quarter of 2021, the market value of cryptocurrencies approached the level of 3 trillion dollars. From this perspective, we can say that $2 trillion has evaporated!