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The cost of bitcoin is falling, but many experts give positive forecasts



Bitcoin started Tuesday morning with a decline. At one point, the coin traded at $21,141. According to the website for tracking the value of digital assets CoinMarketCap, over the past 24 hours, the lowest price of bitcoin reached $20,577, and the highest – $21,478.

Bitcoin has demonstrated confident positive dynamics until Tuesday, since June 18.

Altcoin Market B
itcoin's main competitor, the Ethereum altcoin, also started Tuesday's trading session with a drop and at one point it had reached the $1,182 mark.

As for cryptocurrencies from the top 10 by capitalization, over the past 24 hours, all virtual assets, with the exception of a few stablecoins, have been declining in value. At the same time, Dogecoin (-6.77%) recorded the sharpest drop. According to the results of the past week, this cryptocurrency, on the contrary, showed the best results, soaring by 15.81%.

According to the world's largest aggregator of data on virtual assets CoinGecko, over the past day in the top 100 most capitalized digital assets, the Chiliz coin topped the list of leaders (+15.2%), and the first place in the drop list went to Synthetix Network Token (-13.0%).

Assessment of the market situation

Experts believe that the main reason for such a spectacular collapse of the crypto market in June is the loss of investors' appetite for risks. The weekly trading volumes of bitcoin and Ethereum fell below the levels of 2021.

At the same time, since the beginning of this year, the trading activity of the main altcoin has decreased significantly more than the indicators of the BTC. So, since January 2022, amid extreme market conditions, the outflow of users from the Ethereum network has increased by 28%.

Many analysts believe that it is not worth waiting for the recovery of the activity indicators of the leading cryptocurrencies in the near future, because the current bear market has become the most painful and protracted for the digital asset market in the entire history of their trading. At the same time, the key factors that led to such a deplorable state of cryptocurrencies, experts call a record increase in inflation and the tight monetary policy of the world's central banks.

For comparison, back in November 2021, the total capitalization of the virtual coin market exceeded the $3 trillion mark. Now this indicator balances at the level of $1 trillion.

An equally important proof of the seriousness of current market conditions was the decrease in the spot value of bitcoin below the selling price by 11.3%. Now traders are forced to sell their cryptocurrency at a significant loss. This situation in the virtual asset market is observed only for the fifth time since the launch of bitcoin in 2009.

What awaits bitcoin in the future?

The prolonged agony of the virtual asset market forces experts to make the most unexpected predictions about its future. Recently, analysts from Arcane Research suggested that the potential for reducing the value of bitcoin remains at $10,350.

Earlier, Jeffrey Gundlach, CEO of DoubleLine investment company, said that bitcoin could soon collapse to the $10,000 mark after a series of recent falls that made investors seriously doubt the stability of the cryptocurrency markets.

At the same time, some crypto experts continue to believe in the bright future of the first cryptocurrency. So, recently, a popular analyst and microblog presenter under the nickname Crypto Rover suggested that bitcoin has not yet completed growth and ahead of it is the fifth, final wave of positive movement.

A similar opinion is shared by the CEO of the software company XOR Strategy. So, recently, Aurelien Ohayon said that the BTC has reached a cyclical bottom and will soon make a rebound from the lows, starting a new growth cycle. If his assumption becomes a reality, Ohayon believes, by the end of June, the MTC can easily reach the level of $30,000.

Previously, well-known trader Peter Brandt predicted the return of bitcoin to a bullish trend when the BTC market dominance index will surely recover above 50%. At the moment, this indicator is balancing at 43.4%. It fell below the 40% level back in January 2022 and has not crossed the 50% mark since then.

Mike Novogratz, CEO of virtual asset management company Galaxy Digital, is also confident that the worst time for bitcoin is over. The analyst suggested that the main reason for the current sales in the crypto market was the liquidation, and not the deliberate refusal of traders from digital assets. According to Novogratz, the record volatility of cryptocurrencies eliminated too many orders, which triggered the recent collapse of the BTC below $18,000.

Despite all his optimism about the future of digital coins, Novogratz admits that a large-scale recession is coming to the crypto market, which will significantly hit the global economy.

Novogratz believes that bitcoin will be able to confidently turn to a bullish trend when the US Federal Reserve stops its tight monetary policy and a permanent increase in the key interest rate. According to the expert's calculations, the virtual asset market will remain in a state of recession for about 18 months.

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The euro is looking for a bottom



Inflation statistics for Germany misled the markets at the moment. Judging by the slowdown in the indicator in the locomotive of the European economy, some players began to anticipate a possible peak in inflation. A similar report from Spain somewhat grounded the markets, as inflation in this country was higher than expected.

Inflation Rate in Germany (M/M)
Market players will now look for clues on how the European Central Bank will behave at the upcoming meeting in July. Will the central bank take into account the fact that the worst of the current spikes in inflation may have passed and it will be possible to apply a less aggressive approach to raising rates.

At the moment, the ECB is ready to raise rates in July and then in September. The size and number of upcoming increases matter for the euro. If the meeting talks about 50 bp, it will be seen as a strong commitment to normalizing policy and potentially support the single currency.

The softening of inflation indicators may be a good reason for a symbolic rate hike– by only 25 bps. This will disappoint the players, as they are already set up for a more aggressive approach by the ECB. Lower inflation data may also mean a reduction in the frequency of rate hikes. In other words, the tightening will not happen monthly, as investors think.

Prior to the release of inflation data, the markets predicted a rate hike of at least 30 bps. The main scenario, after all, was an increase of 50 bp, besides, this figure increasingly surfaced in analytical and financial reviews.

It is worth noting that on June 13, the market expected the ECB deposit rate to peak at 2.48%, but since then it has fallen and as of June 27 was at 2.04%. There is reason to believe that this value will become even lower further.

Holding back expectations of a rate hike will trigger a mechanical reaction of the euro's decline, as was seen at midweek trading. Consequently, the summer consolidation of the EUR/USD pair may be limited to 1.0350-1.0642, and not 1.0350-1.0800.

Be that as it may, the euro does not look completely hopeless. Annual CPI in Spain for May was 10.2%, which is higher than expected 9% and 8.7% for the previous period. It is too early to talk about the stabilization of the inflationary situation in the euro area as a whole, so the ECB is likely to maintain its current rate.

Bank of America Forecast
The euro's weakness is due to the softness of the ECB and the periphery.

When it comes to a raise, it will be difficult for the central bank to keep up with other major central banks tightening policy. The policy divergence between the major central banks will be a key driver of the exchange rate in the coming months, according to Bank of America.

The ECB was left with the lowest interest rate in the G-10. While the majority is starting a quantitative tightening (reversal of easing) program, the ECB is only now about to complete its quantitative easing.

Analysts are convinced that Europe will not begin quantitative tightening until at least the end of 2024. The rate is likely to be increased by 25 bp in July.

The ECB will remain dovish compared to other members of the Big 10 until it eliminates the risks of fragmentation. In this regard, market players will pay more attention to how the ECB solves the issue of curbing the yield of Italian and Greek bonds.

Failure to solve this problem is highly likely to destabilize the eurozone and, therefore, is a key risk for the prospects of the euro.

However, ECB representatives have recently started talking about tools to ensure that the difference in bond yields between different countries remains stable, thereby containing risks. The information was once again reiterated by ECB President Christine Lagarde during her speech at the annual ECB forum.

In the near future, there will be a plan according to which the central bank will continue to buy bonds of vulnerable countries, which will limit the yield that these bonds pay, and therefore limit the cost of borrowing.

To compensate for the stimulus, the bank will pump out liquidity from other parts of the system, potentially offering banks attractive interest rates to hold cash with the ECB, Reuters reports. This is known as the "sterilization" program.

Bank of America has little faith in promises. If we are talking about the development of an instrument, this means that it is not in the ECB.

Bank of America's medium-term forecasts for the euro remain pessimistic until the end of this year. In the long term, a gradual return to equilibrium is expected.

"We maintain our forecast for EUR/USD for this year at 1.0500, which is still below the consensus forecast of 1.1000," analysts write.

In 2023, the quote is expected to be at the level of 1.1500, increasing to 1.2000 in 2024. Nevertheless, uncertainty remains high for these years as well.

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Dollar moving away from the decline, and the sliding euro is far from slowing down



The US currency is firmly in the leading positions, once again confirming its strength. At the same time, experts fear that the fall of the euro in the EUR/USD pair, which began last week, will continue.

At the end of the past week, the greenback demonstrated a reduction in price in relation to the euro, which continued to weaken. Disappointing reports on the US industrial sector turned out to be the driver of the USD decline. According to current data, the index of business activity in the American industry (ISM Manufacturing) fell to 53% in June from 56.1% in May.

Against this background, the European currency sank significantly against the American one. The catalyst for the fall of the EUR was a large-scale acceleration of annual inflation in 19 eurozone countries. According to reports, inflation made a dizzying turn in June, rising to 8.6% from the previous 8.1%. According to experts, this is another record rise, which increases the likelihood of a tightening of the monetary policy by the European Central Bank.

Many market participants are confident that the ECB may raise the rate again at the July meeting. The reason is the prolonged acceleration of inflation and the risk of its increase. In the current situation, the ECB is ready to revise its forecast of economic growth downward. Against this background, fears about stagflation in the eurozone are growing.

Earlier, ECB President Christine Lagarde expressed concerns about the recession, but hoped for a favorable outcome for the eurozone economy.

However, a number of negative factors, such as galloping inflation, low economic growth and a prolonged energy crisis, increase the central bank's concern about a significant downturn in the European economy.

Against this background, the greenback has noticeably strengthened, once again "stepping on the heels" of the euro. On the morning of Monday, July 4, the EUR/USD pair was trading at 1.0433, approaching 1.0349 – a five-year low reached in May. According to analysts, such actions mean a flight to the dollar on the part of investors.

Some market participants prefer to invest in USD amid unfavorable prospects for the global economy. At the same time, experts record a number of alarming signs indicating a weakening of the US economy. It should be noted that personal spending in the United States decreased to 0.3% in June from the previous 0.6%. At the same time, the inflation rate is gradually decreasing, and the labor market in the United States is showing steady growth. And so the markets expect the Federal Reserve to continue fighting high inflation and tightening monetary policy.

At the beginning of this week, risky currencies were trading near multi-year lows against the greenback, while the euro remained under pressure. Investors prefer safe haven assets, primarily the dollar. Powerful financial injections supported the latter, allowing it to strengthen against the currencies of exporting countries. Additional support for the USD was provided by the deterioration of the prospects for the global economy. Currently, the greenback is held at high levels, and the dollar index has consolidated near 105,100, approaching the high in the last 20 years. The growth of the US currency was not prevented by the doubts of market participants about the next rise in interest rates in the United States.



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World stock indices received support from the recovery in oil prices



The European equity markets index rose 0.8%, while the UK FTSE index climbed more than 1%, helped by gains in oil and gas stocks.

Oil fell $1 a barrel earlier on Monday on worries about the global economic outlook, but declines in production from the Organization of the Petroleum Exporting Countries (OPEC), unrest in Libya and sanctions on Russia outweighed those concerns.

Ecuador's oil production has been hit lately by civil unrest, and a strike in Norway could cut supplies this week.

Steven Brennock, a spokesman for oil broker PVM, said the growing supply disruption was exacerbated by a possible shortage of spare capacity from Middle Eastern oil producers. Prices will continue to rise unless new oil hits the markets soon.

A survey of analysts on Friday showed that production of 10 OPEC countries in June fell by 100,000 barrels per day to 28.52 million barrels per day. In the meantime, they promised to increase it by about 275,000 barrels.

Brent crude rose 1.25% to $113.02, while WTI rose 1.2% to $109.76 a barrel.

The MSCI World Markets Index rose 0.38%, while it lost 2.3% last week.

In June, global equity markets hit 18-month lows amid worries about rising inflation and higher interest rates, but have rallied slightly since then.

The broadest MSCI index for Asia-Pacific countries excluding Japan rose by 0.34%.

The Chinese Blue Chip Index finished the day up 0.7% on the back of a 4.65% gain in the sub-index of medical stocks. Cities in eastern China tightened COVID-19 restrictions on Sunday amid new coronavirus outbreaks.

The Japanese Nikkei added 0.84%.

US S&P 500 and Nasdaq futures shed 0.4% and 0.5%, respectively, as recent weak US data suggests a weaker data in the June jobs report due on Friday. American stock markets are closed today.

The Atlanta Fed's long-awaited Q2 GDP outlook has dropped to -2.1% year-on-year, meaning the country is already in a technical recession.

The jobs report is forecast to point to a slowdown in June job growth to 270,000, with median wage growth declining to 5.0%.

The minutes of the Fed's June meeting, which will be released on Wednesday, are expected to indicate the central bank's inclination to decisively tighten policy. Earlier, the Open Market Committee decided to raise rates by 75 basis points.

The likelihood of another 75 basis point rate hike this month and a rate hike to 3.25%-3.5% by the end of the year is estimated by the market at about 85%.

The US Treasury market is closed today, but their futures market is open and continued to rise. Judging by it, the yield of 10-year bonds is kept at the level of 2.88%; it has fallen 61 basis points since its June peak.

The yield on German 10-year government bonds, the eurozone benchmark, rose 10 basis points to 1.328%. Last week it was falling as investors began to buy protective bonds.

The US dollar slipped 0.06% to 104.99 against a basket of currencies, rebounding from recent 20-year highs driven by its defensive-currency status.

The euro rose 0.13% to 1.0442, off a recent five-year low of 1.0349. The European Central Bank is expected to raise interest rates this month for the first time in a decade, and the euro could be supported if the central bank decides to raise it by half a point at once.

The Japanese yen also attracted defence-currency buyers late last week, pushing the dollar back to 135.48 yen from a 24-year high of 137.01, though it still gained 0.3% on the day.

A strong dollar and rising interest rates weigh on gold, which traded down 0.15% to $1,808 an ounce. It hit a six-month low of $1,784 last week.

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Zimbabwe's gold standard.



At the end of this month, to try to tame inflation, the Reserve Bank of Zimbabwe will begin selling gold coins, thus providing a store of value for the country's declining currency and an alternative to the US dollar for the public.

The gold coin weighing 22 carats in one troy ounce will be called Mosi-oa-Tunya and will already be available from July 25.

Each coin will be assigned a serial number. After the purchase, the buyer takes possession of the coin and receives a certificate of ownership to the bearer. The buyer or the holder of the coin can transfer it to the bankers of his/her choice for safekeeping, and in this case a certificate of safe storage or a receipt will be issued.

According to the governor of the central bank, John Mangudya, gold coins can be bought for local currency, the US dollar and other foreign currencies.

The price will be set based on the international gold price and production costs.

Owners of gold coins will be able to exchange them for cash. Gold coins can also be used for transactional purposes and as collateral for loans.

According to the press release, the coins will be sold by Fidelity Gold Refinery, Aurex and local banks.

Rising inflation and currency devaluation have made life difficult for the Zimbabwean population. Annual inflation in the country was almost 192% in June.

The central bank of Zimbabwe was forced to more than double the discount rate from 80% to 200%, which was a new record.

Zimbabwe also announced plans to adopt the US dollar as legal tender for the next five years to stabilize the country's exchange rate. This is the second time in more than a decade that Zimbabwe has legalized the US dollar as legal tender.

According to the country's Finance Minister Mthuli Ncube: the government has announced its intention to maintain a multi-currency system based on the dual use of the US dollar and the Zimbabwean dollar.

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China and the USA

The confrontation between countries with the first and second economies of the world lasts for years and runs along a variety of lines – from trade to intellectual property rights. Now Western sanctions against Russia have been added here, and Washington has directly warned Beijing about the consequences if they are violated. The United States has already blacklisted five Chinese companies last week, accusing them of supporting the Russian military-industrial base. However, at the same time, the American authorities say that China generally complies with the sanctions restrictions. The situation is quite slippery, especially amid statements about US President Joe Biden's plans to lift some restrictions on trade with China (introduced under Donald Trump). In addition, Beijing itself may fall under sanctions for aggression against fr. Taiwan, which China considers its territory. The relevant bill has already been submitted to the US Senate.

China and Investment

For more than four months, global markets have been operating in a changed reality and new standards. As the history of the last hundred days has shown, geopolitical events can become a threat to investments and indices, and very quickly. By the way, China has faced negative market movements and capital outflows before. In total (according to the Institute of International Finance, IIF), from January to March 2022, investors have already withdrawn more than $30 billion from China.

The main reasons for the outflow of capital were:

lockdowns due to COVID-19;

problems in the Chinese real estate sector;

rising yields on US Treasury bonds.

Moreover, according to the same IIF, there is "a perceived risk of investing in countries whose relations with the West are difficult." How much are investors willing to invest in stocks that may not be able to get out quickly if necessary?

China and COVID

In addition to fears of becoming a pariah of world markets in the event of political conflicts, the Chinese market is also under pressure from a zero tolerance policy for COVID. Lockdowns, testing and other restrictive measures have been introduced in Shanghai for several months now (after a new outbreak of the disease) and then in Beijing. As a result, many production processes and the operation of the world's largest port have slowed down. The real estate market is still depressed, consumer spending is weak, and businesses do not want to hire employees and invest because of COVID.

The quarantine also affected the work of shopping and entertainment centers, restaurants, etc. Last week, some breaks were introduced for residents and tourists, but on Tuesday Beijing again announced mass testing of most of its residents after an outbreak in a karaoke hall. Chinese President Xi Jinping said that it is better to bear the "temporary" economic costs of the "wartime" state than to "harm people's lives and health".

China and the world market

Meanwhile, many market experts believe that even in the event of political negativity, sanctions against China will be unlikely. The fact is that the size of its economy and markets is so large that it will cause much more harm to the West than, for example, the restrictions imposed on Russia.

For comparison:

China accounts for 40% of emerging market stock indices;

Before February 24, Russia accounted for 6.1% of benchmark debt.

The impact of sanctions against China on global financial markets will also be much greater.

China and economic growth

And although analysts believe that a precedent has already been set for restrictive and punitive sanctions, such a move against China looks more far-fetched than realistically feasible. However, even this risk deters investors. But not everyone. Last month alone, net inflows into China-listed equities totaled $11 billion. "Playing" on the side of China:

the size of its economy;

a huge amount of foreign money invested in Chinese enterprises.

Particularly contrasting amid recession fears in the West is that China is the only major economy in the world that promises a recovery in growth this year. In addition, according to some sources, to revive its economy, China is preparing to create a state infrastructure fund worth $74.69 billion in the third quarter.

 

USD/JPY: Japanese yen shaken by assassination of Shinzo Abe

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images.ifxdb.com/userfiles/20220708/analytics62c80bf898ba2_source!.jpg

The Japanese yen moved upwards slightly following first reports of an assassination attempt against former Prime Minister Shinzo Abe. JPY reversed downwards almost immediately, but Abe's death could have some effect on the Japanese yen's performance.The yen spiked by 0.5% against the dollar at one point. US Treasury bonds also increased, as investors sought safe-haven assets.Analysts and economists have made a number of outlooks on JPY. Some claim a shift in BoJ's policy is likely, while others expect the event to have only a short-term effect on the markets. On Sunday, elections to the upper house of the Japanese parliament will be held.

What are the implications?
Former PM Abe was a well-known figure, very popular abroad and respected by investors. Abe pulled the strings of the Japanese economy from behind-the-scenes - he was the creator of the "Abenomics" economic policy. Abe's death might give an impression that the Bank of Japan could adopt a different monetary policy. If the BoJ abandons its stance on monetary easing, it would disappoint market players."Abe had been supporting Bank of Japan Governor Kuroda. The bank's policy could change as they would lose that backing," Tomoichiro Kubota, senior market analyst at Matsui Securities said."This may have an impact in the medium to long-term, and the markets will see a considerable appreciation of the yen and a decline in stock prices," he added.The yen has shown a safe haven bid today, as political risks had an additional premium ahead of the weekend election. There may be sympathetic support for the Liberal Democratic Party at the election. Given the lack of details, JGB market players are likely to take a wait-and-see stance.At this point, it is unclear whether the yen would extend its upside momentum or not. The fact that Abe was a former PM could prove key, limiting the market reaction.JPY remained in the trend channel in the run-up to the release of US non-farm payrolls. The US payroll data could seriously affect the yen's performance.

Will non-farm payrolls shake up JPY?
Previously, US non-farm payroll data was one of the most anticipated data releases, However, market reaction to this data could not be as strong as before, as the Fed focuses on fighting inflation.Nevertheless, the NFP report could be a market driver, as investors still see it as a benchmark for the US economy. Economists expected the US economy to create 275,000 jobs in June, down from 390,000 in May. Investors could interpret weak NFP data as a signal of an economic slowdown, putting pressure on USD/JPY.

What will save the yen?
Up until this point, the Bank of Japan continued to stand by its monetary easing policy. Due to interest rate hikes in the US and around the world, JPY lost 15% against USD this year. The Japanese currency also retreated against a wider basket of currencies, falling to the lowest levels since the 1970s.Many traders think the monetary policy divergence was the main reason for JPY's slump. BoJ Governor Haruhiko Kuroda claims Japan does not have to hike interest rates to the extent shown by the Fed, thanks to low inflation in the country.
There is a lot of speculation on whether traders should take advantage of the slump and go long on JPY. Unforeseen global developments could at some point seriously drive up the yen's defensive bid. As market players give contrasting recommendations, some even question JPY's weakness and whether it needs support or not. There are reasons to believe that it is necessary.

So what can push the yen upwards?
JPY has been sliding down due to fundamental factors and not market speculation. A reassessment of monetary policy by the Bank of Japan would increase the yield of Japanese government bonds, decreasing the gap between Japanese and American interest rates. This would boost the yen in the short term amid US Treasury yields approaching their peak. Lifting travel restrictions for foreign tourists would add additional support for JPY.
Currently, USD/JPY is likely to be highly volatile in the future. A steady upward trend for JPY would require fundamental changes of trade flow patterns, as well as significant policy adjustments that would go beyond economic aspects.

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Major European stocks rise mostly by 0.10-1.34%



Major European stocks rose mostly by 0.10-1.34%. Only the Spanish IBEX 35 declined by 0.27%. All other indices increased. The British FTSE 100 gained the least. It went up only 0.1%. Germany's DAX is the top gainer, adding 1.34%. France's CAC 40 advanced by 0.44% and Italy's FTSE MIB rose by 1%. The STOXX Europe 600 index was up 0.51%, ending positive for the third consecutive session.

Strong data on US unemployment partly contributed to investors' positive sentiment. According to this data, the US economy is on the verge of recession. It added 372,000 jobs in June. Meanwhile, analysts forecasted that the number of jobs would grow by 265,000-268,000. The unemployment rate remained unchanged at 3.6% compared to May.

European stock indices advanced despite traders' growing concerns about a possible economic downturn due to severe measures of global central banks to combat inflation.

Nevertheless, the latest statistical data show that the EU economic situation is deteriorating. The key reason for it is a sharp increase in energy prices, gas in particular, due to the reduction in Russia's energy supplies.

An economic slowdown is most likely amid the ECB's plans to raise interest rates. Moreover, the economic slowdown may last for several months.

Next week, US and EU companies will publish their corporate reports for the second quarter of 2022. However, many economists predict that they will worsen their outlook on major indexes.

Shares of Commerzbank AG (+ 7.9%), Societe Generale (+ 2.4%), Deutsche Bank (+ 2.7%), as well as Credit Agricole (+2.1%) and BNP Paribas (+2%) were among the major gainers of the STOXX Europe 600 index.

Volkswagen AG announced that it would plan to invest more than 20 billion euros in a new program to manufacture batteries for electric cars by 2030. Later, its shares rose by 5.1%. Porsche Automobil Holding SE stocks also went up, gaining 6.1%.

Shares of Electricite de France SA added 5.6% after the announcement of the company's nationalization and the suitable candidate for the position of CEO.

The major reason why Uniper shares rose by 0.6% was the company's call for aid to the German government.

Moreover, shares of oil and gas companies gained: OMV AG added 6.6% and Orron Energy AB went up 6.4%.

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The euro is in a deep depression. Is it a dead end?



The European currency is frantically looking for a way out of the current situation, when the decline persists, and parity with the dollar looms on the horizon. At the same time, the US currency remains in an upward trend, fueled by the interest of investors seeking to withdraw into the USD amid the possible onset of a recession.

At the beginning of trading on Tuesday, July 12, the euro was balancing near a 20-year low, steadily approaching parity with the dollar. Experts believe that the main reason for this phenomenon is the growing fears about the energy crisis, which can plunge Europe into recession. Against this background, the actions of the Federal Reserve, which continues to aggressively tighten the monetary policy in order to curb inflation, contrast sharply with the indecisiveness of the European Central Bank.

According to Trading Economics analysts, the euro has updated its low against the greenback over the past 20 years. The single currency lost about 1.2% on Monday, July 11, dropping to 1.0067. In the future, the fall continued. On the morning of Tuesday, July 12, the EUR/USD pair was trading at 1.0011, breaking another anti-record.



The euro reached new lows on Monday, remaining under pressure against the dollar. According to preliminary estimates, the strengthening of the euro is unlikely in the second half of 2022, since the European economy may suffer a technical recession. According to analysts of the National Bank of Canada, in the near future, the euro will remain "at a level close to the bottom."

The improvement of the situation for EUR is possible with the stabilization of energy prices, experts are certain. Currently, the single currency is suffering from a sharp rise in energy prices. The situation is complicated by the geopolitical conflict in Eastern Europe and rising inflation in the eurozone. These factors are steadily pushing the euro to parity with the dollar, that is, to the level of 1.0100.

The second half of 2022 does not imply the formation of conditions suitable for strengthening the euro. According to experts, the European economy is closer than ever to a burst of technical recession. In the near future, the EUR will remain at a low level, analysts summarize.

Against this background, the US currency is strengthening its position, overtaking its rival in the EUR/USD pair and bringing the probability of parity closer. On Wednesday, July 13, the markets are expecting reports for June on inflation in the US and Germany. According to analysts, annual inflation in Germany slowed to 7.6% in June (from the previous 7.9%). As for the preliminary calculations about the United States, last month consumer prices increased by 8.8% year-on-year. Recall that this figure was 8.6% in May.

Confirmation of this scenario means that inflation in the US remains at the highest level in the last 40 years. At the same time, a weaker consumer price index will slow down the potential fall of the EUR/USD pair to parity. However, a postponement is possible only until the European Central Bank decides on the rate, that is, until the meeting next Thursday, July 21.

Most analysts agree that further acceleration of inflation contributes to an increase in the key rate in the United States (by another 75 bps). At the same time, decisive action is also likely from the ECB, which is prone to procrastination in this matter. The course of tightening monetary policy taken by the Fed will provide additional support to the greenback and increase pressure on the euro.

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Asian markets advance slightly on Wednesday



Asian stock indexes increased slightly on Wednesday. The S&P/ASX 200 edged up by 0.05%, while the Shenzhen Composite rose by 0.95%. The Shanghai Composite and the Nikkei 225 gained 0.36% and 0.41% respectively. The Hang Seng Index advanced by 0.71%, while the KOSPI increased by 0.73%.

Indexes in the Asia-Pacific region entered a slight correction following an earlier slump triggered by fears of a new wave of COVID-19 in the region. China has re-imposed quarantine measures, while South Korea reports an increase in coronavirus infections.

New lockdowns could weigh down on Asia-Pacific economic growth.

Traders also noted policy decisions by the main central banks, which are striving to bring soaring inflation under control. The Bank of Korea has increased the interest rate by 50 basis points to 2.25% from 1.75%, matching market expectations. Economists see the South Korean regulator hike the rate further in the near future.

South Korean stocks increased slightly, with LG Electronics, Inc. and Samsung Electronics, Co. gaining 0.7% and 0.5% respectively.

On the S&P/ASX 200, the best performing stock was Megaport, Ltd, which jumped by 6.5%. St. Barbara, Ltd. rose by 4.7%, while Pointsbet Holdings, Ltd. increased by 5%.

Investors also awaited the release of US CPI data. Inflation in the US was projected to increase to 8.8% in June, up from 8.6% in May.

Rising inflation would boost expectations of further monetary tightening by the Fed. However, it can also indicate that inflation has peaked amid falling crude oil prices. Market players are wary of higher interest rates weighing down on the global economy.

According to the latest statistic data, China's exports increased by 13.2% year-on-year over the past 6 months. Imports rose by 4.8%.

On the Hang Seng Index, Haidilao International Holding, Ltd. increased by 6%, while JD.com, Inc. and Sands China, Ltd. rose by 4.6% and 3.8% respectively. Shares of Tianqi Lithium, Corp. dived by 10% in their market debut.

On the Nikkei 225, the best-performing stock was Toho, Co., which climbed by 6.1%. The movie theater company's net revenue surged by 72% in the first quarter thanks to a rise in theater visitors.

Tokyo Electric Power Co Holdings Inc. increased by 5.6%, Recruit Holdings Co., Ltd. gained 2.9%, Honda Motor Co., Ltd. rose by 2.6%, and SoftBank Group, Corp. advanced by 2.4%.

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Dollar: fireworks of growth and inflationary confrontation



The US currency once again took advantage of rising inflation, soaring after the release of the consumer data index (CPI) in the US. However, "skimming the cream" after an inflationary turn, the dollar risks sinking in the medium and long-term planning horizons.

According to reports from the US Department of Labor, the inflation rate measured by the consumer price index (CPI) has soared to the highest in four decades. By the end of June, it reached 9.1% year-on-year, demonstrating the most significant increase since 1981. Recall that this indicator did not exceed 8.6% in May. At the same time, the expanded inflation indicator in the United States increased by 1.3%, which is the highest level since 2005. This indicator reflects the increase in prices for gasoline, housing and food.

Against this background, the US currency showed an incredible rise, sharply overtaking the euro in the EUR/USD pair. In the current situation, the euro sank by 0.3%, reaching 1.0004. As a result, the dollar, having tested another high, returned to parity with the euro after a short-term breakthrough. On Wednesday, July 13, the single currency fell to the level of 0.9998 for the first time since December 2002. Then the euro fell by 0.39% on the morning of Thursday, July 14, reaching 1.0020. Later, the EUR/USD pair traded at 0.0023, unsuccessfully trying to get out of the price hole.



The sharp spurt of the dollar amid the rise in consumer prices was accompanied by a violation of parity on the part of the euro. After the release of US inflation data, the euro slipped below the parity level in the EUR/USD pair. According to analysts at Commonwealth Bank of Australia, the parity of both currencies, settled at 0.9900, remains the lower limit for the EUR/USD pair. In the future, currency strategists expect consolidation to come in tandem.

Movements in the EUR/USD pair are taking place amid rapidly growing inflation, which has accelerated significantly after reaching a high over the past 40 years. Further strengthening of inflation increases the risk of an aggressive rate hike by the Federal Reserve. According to analysts, this will trigger a recession in the near future. At the same time, concerns about the recession provide significant support to the greenback.

According to Rafael Bostic, president of the Atlanta Fed, extremely high inflation leaves the US central bank no choice in raising interest rates, which is likely to be resolved positively. This statement was supplemented by Wells Fargo analysts, explaining that the Fed will need several monthly inflation indicators to make a final decision on the rate. Regarding the June consumer price index (CPI), experts expected that it "will be hot, but this report just burns." Recall that consumer price inflation in the United States outstripped already inflated expectations, soaring by 1.3%. In annual terms, prices rose by 9.1%, which is a new cyclical high.

According to experts, a steady increase in prices for basic goods, recorded for two months, is extremely undesirable for the Fed. The central bank seeks to weaken core inflation in the consumer goods segment amid a rapid rise in the cost of food and energy. However, progress in this matter is minimal so far.

In such a situation, the greenback was the winner, drawing strength from the unwinding of the inflationary spiral. However, there is a walk on thin ice here: in the long term, the USD risks to sink significantly. At the moment, the dollar feels confident, demonstrating its importance to the world. The recent aggressive USD rally indicates that the US currency acted as a shield for the population of the United States suffering from extremely high inflation.

In the current situation, the purchasing power of American imports is increasing. Note that a strong dollar provides protection from inflation in the form of cheaper imports. However, Morgan Stanley analysts believe that the strengthening USD adds risks for the Fed, as a strong national currency makes it difficult for the central bank to cool demand. Such a situation provokes further tightening of the monetary policy or leads to stagflation. Recall that with stagflation, high inflation persists, but economic growth slows down significantly.

Another important factor undermining the strength of the dollar in the EUR/USD pair remains the cardinal difference in the monetary strategies of the Fed and the European Central Bank. This year, the US central bank has raised rates by 1.50%, and the European one is still in thought, although inflation in the eurozone is also breaking records. The gap between the Fed and ECB rates will grow after the June consumer price index in the United States showed a new 40-year high. At the same time, experts do not rule out that this month the ECB will begin its rate hike cycle, but with a smaller step – 0.25%.

In the long term, the strengthening of the greenback will contribute to further tightening of financial conditions. Against this background, the Fed continues to reduce its balance sheet, Morgan Stanley emphasizes. As a result, a strong dollar increases the risk of a recession in the United States, which many investors consider inevitable.

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Gold cannot withstand the onslaught of a strong dollar



Gold is falling in price on Thursday amid a rising dollar. Judging by the rise in US currency quotes, investors reacted with enthusiasm to record inflation data in the US.

So, in the morning hours of the European trading session, the price of the August gold futures on the New York Comex exchange fell by 0.52% to $1,726.45 per troy ounce. By 14:50 GMT, the quotes had already fallen by 2.23% to $1,696.85. Silver by this time managed to decline by 5.61%, to $18,117.

At one point the August gold futures were at $1,704.28.



The dollar index, or its exchange rate against a basket of six other currencies, rose 0.96% today, reaching 109.03 points. A stronger dollar makes gold less affordable when buying in a different currency. The yield on 10-year US Treasury bonds is 2.982%. The yield curve of 2-year and 10-year Treasury bonds remains inverted and the most inverted over the past 22 years. This indicates an approaching economic recession.

In addition, another inflation report was published on Thursday, which made a lot of noise and caused a storm of emotions among traders. According to the data, in June, annual inflation in the United States rose to 9.1% in annual terms (it was at the level of 8.6% in May). This June figure was the highest in the United States since November 1981.

Obviously, in this scenario, the Federal Reserve is forced to keep its finger on the pulse of aggressive tightening of monetary policy. According to the CME Group, almost 82% of analysts are confident that at the July Fed meeting the discount rate will be significantly increased – immediately by 100 basis points, that is, to the level of 2.5-2.75%. By the way, before these data were released, about 91% predicted a rate increase of only 75 basis points. It just so happened that the increase in the US rate (and even expectations of its increase) has a very beneficial effect on the exchange rate of the US national currency, but for the demand for gold, this news can be called negative.

A significant difference in interest rates in large countries (they are higher in the US) leads to the spread of the so-called Carry Trade, when international traders and institutions exchange their own currencies for possession of the US dollar. As history shows, this phenomenon can persist for quite a long time, which once again will only strengthen the dollar.

The strong drop in crude oil futures prices this week is also a factor reducing the prospects for gold. NYMEX futures dropped overnight to the lowest level in the last three months – $93.24 per barrel. January crude oil futures are trading at $84 per barrel. This indicates that the market is confident that crude oil prices will decline in the coming months. The fall in the cost of crude oil contributes to a decrease in the value of assets in other commodity markets. Such a noticeable weakening of the commodity sector is an important early sign that inflationary pressure has already reached its peak.

So, we are seeing an increase in bond yields, a rise in the dollar, while a noticeable drop in crude oil prices. Obviously, these are all clearly bearish elements that are working against bulls in the metals market today. In addition, investors' fears about the recession in the United States are growing stronger and there is a decline in consumer and commercial demand for metals.

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Asian markets close higher on Monday



Asia-Pacific markets broadly advanced on Monday. The S&P/ASX 200 rose by 0.80%, while other indexes gained 1.50% or more. The Shanghai Composite and the Shenzhen Composite increased by 1.49% and 1.48%, respectively. The KOSPI went up by 1.65%, while the Hang Seng Index climbed by 2.64%. Japanese stock exchanges were closed today, however the Nikkei 225 edged up by 0.54% on Friday.Asian markets followed US indexes, which finished Friday in positive territory. American stock indexes gained about 2% on Friday thanks to strong statistic data which eased recession fears among market players. However, there is still a possibility of a 100 basis point interest rate hike by the Federal Reserve.The upsurge of COVID-19 infections in China is putting pressure on the upside potential of Asian indexes. New quarantine measures threaten to affect economic recovery, increasing the possibility of a recession in China.However, the markets found support in statements by Chinese officials that the country has enough financial resources and options to maintain economic stability in the country. The People's Bank of China has injected 12 billion yuan into the financial system via a seven-day reverse repurchase agreement.On the Hang Seng Index, the best performing stocks were Country Garden Services Holdings, Co., Ltd. (+7.2%), Meitua (+6.4%), and Country Garden Holdings, Co., Ltd., (+6.3%).Chinese oil stocks also went up, with CNOOC, Ltd. increasing by 4.5% and China Petroleum & Chemical, Corp. advancing by 4.1%. Shares of Alibaba Group Holding edged up by 0.8%.On the KOSPI, Samsung Electronics, Co. rose by 2.7%, while LG Electronics, Inc. increased by 1.6%.On the S&P/ASX 200, BHP Group, Ltd. and Rio Tinto, Ltd. gained 1.8% and 1.9% respectively. Shares of Australia & New Zealand Banking Group, Ltd. declined by 1.3% after the company announced it was set to buy Suncorp Bank for 4.9 billion Australian dollars or $3.3 billion.

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Forex Analysis & Reviews: Elliott wave analysis of EUR/USD for July 19, 2022



EUR/USD tested the channel support line at 0.9952 which was just above our ideal target at 0.9902. This could be enough to fulfil the target of wave C and 2 and set the stage for wave 3 higher. The expected impulsive rally in wave 3 should ultimately break above the peak of wave 1 at 1.6038.

To confirm that wave 2 has indeed completed and wave 3 is in motion, we will need a break above minor resistance at 1.0220 and more importantly above resistance at 1.0615.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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Bitcoin steadily rises, but experts see downsurge ahead

Bitcoin went into an upward correction early on Tuesday, reaching $21,793 at the time of writing.

According to CoinMarketCap, over the past 24 hours BTC reached an intraday low of $21,190 and an intraday high of $22,795.



During the trading session, bitcoin rallied and jumped 7.5% to $22,306 in several hours, surpassing $22,000 for the first time since June 8.

However, despite the strong upward movement of the past two days, the bear market still continues for bitcoin, analysts note. The leading currency needs to break above $30,000 to end its downtrend.

Altcoin market
Ethereum, the leading competitor to BTC, has also advanced. At the time of writing, ETH gained 8.12% over the past day and rose to $1,527.

Last week, Ethereum climbed by 20%. ETH has jumped by 47% since the beginning of July, but remains below its all-time high of November 2021 by 71%.

At the end of last week, ETH surged upwards by 12% to $1,300 following an announcement by one of the project's developers that the transition to the proof-of-stake algorithm could occur as early as mid-September.

Out of the top 10 cryptocurrencies by market capitalization, most coins advanced yesterday, except for XRP and several stablecoins.

The best-performing cryptocurrencies were Avalanche (+12.07%), Dogecoin (+5.19%), and Binance Coin (+4.4%).

According to CoinGecko, the best performing coin out of the top 100 cryptocurrencies by market cap was Ethereum Classic, which jumped by 22.8%. The worst performing currency was Lido DAO, which tumbled by 15.4%.

Contrasting outlooks by crypto experts

According to CryptoQuant, a BTC sell-off by miners in the future could push bitcoin's price down significantly.

CryptoQuant's analysts noted that June's downward correction forced miners to dump their BTC holdings to minimize losses and lower the overall risks. The analysts stated that miners are now in a distribution phase and warned that growing pressure caused by the miners' capitulation could push the price well below the $20,000 mark in the near future.

Matthew Kimmell, digital asset analyst at CoinShares, also stated that troubles plaguing the crypto mining sector could cause a downturn for leading digital assets. As mining companies go bankrupt, the prices of mining rigs could also slump, putting extra pressure on crypto assets.

An analysis by Glassnode said the capitulation in the crypto market would likely continue amid ongoing severe financial stress. Rising pressure in the digital asset market would send bitcoin below $20,000.Some experts, such as Nassim Nicholas Taleb, former trader and author of "Black Swan", refused to give any predictions on when the bear market would end. "The journalistic expression 'crypto winter' is highly deceiving; it implies seasonality and, perhaps worse, a reversion to some trend. No, your winter may not be transitory, and what you call winter may degrade into a permanent & inescapable ice age fraught with extinctions," Taleb claimed.

An outlook by Grayscale Investments was more bullish on crypto and bitcoin and particular.

The investment company's analysts claimed the bear market could last for another 250 days, citing their estimates of trend cycles in the crypto market. Grayscale stated the downtrend was a regular market event that repeats every several years, and that it presented a good buying opportunity.

Investment advisor Edward Dowd said bitcoin could soon become an integral part of any investment portfolio, despite the repeated turmoil in the market. Dowd added that BTC could also surpass gold thanks to its decentralized nature and transparency.

Arthur Hayes, former CEO of BitMEX, claimed bitcoin would rise swiftly after touching the bottom. Hayes sees the Federal Reserve begin printing trillions of dollars in the future, which would then push BTC up.

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EUR/USD. Trapped in inflated expectations: ECB July meeting preview

The European Central Bank will sum up the results of its next - July - meeting on Thursday. This is by no means a "passing" meeting: for the first time in the last 11 years, the ECB will raise interest rates.



By itself, the fact that there will be an increase in the rate has already been resolved, the intrigue remains regarding the magnitude of this increase. In addition, traders are interested in further prospects for tightening monetary policy amid existing risks for the debt market. In other words, the results of tomorrow's meeting will surely provoke strong volatility for the EUR/USD pair. The only question is, on whose mill will the water be poured. If the central bank surprises with an ultra-hawkish tone, the pair could not only test the 1.0300 resistance level, but also consolidate in the area of the 3rd figure. Otherwise, the euro will again be under pressure throughout the market. In my opinion, current market expectations are somewhat overstated, so there is a possibility that the ECB will not live up to its hopes on Thursday.

It is worth noting that a few weeks before the July meeting, traders actually resigned themselves to the fact that the ECB would gradually and measuredly tighten monetary policy. Representatives of the ECB have repeatedly said that it is impossible to sharply raise the rate to curb inflation - primarily because of the risks for the debt market. Just last week, a member of the Board of Governors of the central bank, Olli Rehn, announced that at the July meeting the rate would be increased by 25 basis points. Similar forecasts have been voiced by ECB President Christine Lagarde and some other members of the Board of Governors.


With such a wide-ranging and unequivocal preview, the market has grown accustomed to the idea of a 25-point advance in July. All attention was focused mainly on the prospects for further steps by the ECB, primarily in the context of the September meeting.

However, the day before yesterday, the market was stirred up by journalists from the news agency Reuters. Referring to their anonymous sources in the ECB, they said that the option of a 50-point rate hike is still on the agenda. At the same time, agency reporters quite recently (July 15) interviewed more than 60 economists about the possible outcomes of the July meeting. 62 out of 63 experts surveyed unanimously stated that the central bank will increase the rate by 25 points. In this case, economists reflected market expectations, which until recently prevailed among traders. However, insider information from Reuters, as they say, mixed all the cards.

Amid these hawkish rumors, the euro has significantly strengthened its position against the dollar. Bulls were able to move away from the parity level by more than 200 points, updating a two-week price high on Wednesday, rising to 1.0274. But, in my opinion, this is a Pyrrhic victory for the EUR/USD bulls, which could have negative consequences for the euro.

In fact, EUR/USD bulls are repeating the mistake of the dollar bulls, who were inspired last week by rumors that the Federal Reserve could raise rates by 100 points at once following the results of the July meeting. Such a hawkish scenario was supported by Fed spokeswoman Mary Daly, who, however, does not have a vote in the Committee this year. Nevertheless, the hawkish rumors did their job: the EUR/USD pair again renewed the 20-year price low, plunging below the parity level, to the level of 0.9953. But as soon as other Fed officials (primarily those with voting rights) criticized the idea of a 100-point increase, the greenback weakened across the market. The dollar literally slipped out of the blue and allowed opponents to seize the initiative.

EUR/USD bulls may find themselves in a similar situation on Thursday. After all, now a 25-point increase in the rate is no longer the base scenario, but a "conditional dove" scenario, the implementation of which will put pressure on the euro. To strengthen the single currency, the ECB needs to either raise the rate by 50 points on Thursday or announce such a step in the context of the September meeting in plain text. Any doubts of the central bank will be interpreted against the euro.

Also on the ECB's agenda is the issue of a possible uncontrolled expansion of spreads between the yields of government bonds of the EU core countries and the southern states of the bloc. Back in June, the ECB announced the development of a new tool to limit fragmentation in the eurozone. According to Bloomberg, at its July meeting, the central bank will present an unlimited bond buying tool that will help markets "adjust to sharper and faster interest rate hikes than previously thought." However, if the representatives of the ECB show excessive caution in tightening monetary policy, this fundamental factor will be ignored by the market.

Thus, the single currency found itself in a kind of trap of inflated expectations ahead of the ECB meeting. In my opinion, it will be difficult for ECB members to realize the expected hawkish scenario, even despite a record increase in headline inflation. It is also necessary to take into account that the core consumer price index in the eurozone (excluding volatile energy and food prices) unexpectedly slowed down its growth on an annualized basis, reaching 3.7% instead of the planned growth of 3.9%. And German inflation last month showed the first signs of a slowdown. All these factors reduce the likelihood that the ECB will decide on a 50-point rate hike.

Consequently, EUR/USD bulls are forced to rely only on an unexpected "hawkish impulse" of the ECB. To put it bluntly, this is an unlikely scenario.

In anticipation of such important events of a fundamental nature, it is advisable to stay out of the market. Amid a general weakening of the US currency and a (possible) weakening of the euro, it is reasonable to wait for the results of the ECB's July meeting: the pendulum will swing in one direction on Thursday, determining the further vector of movement for EUR/USD.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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Asian indicators show different directions



The main indices of the Asia-Pacific region show different directions. Some indices are declining, among them the Chinese Shanghai Composite and Shenzhen Composite, which lost 0.42% and 0.06% respectively, as well as the Hong Kong Hang Seng Index, which decreased by 1.35%. At the same time, other indices show a slight increase: the Australian S&P/ASX 200 gained 0.08%, the Japanese Nikkei 225 at 0.22%, and the Korean KOSPI at 0.71%.

A number of different reasons contributed to this ambiguous behavior of the Asia-Pacific indices: the deterioration of the situation with COVID-19 in China and the concerns about the possible economic recovery as a result.

Market participants reacted positively to the Bank of Japan's decision to leave the rate unchanged at -0.1%. However, the central bank's forecasts regarding the increase in GDP worsened somewhat: to 2.4% from 2.9% announced in April. As for the increase in inflation, expectations, on the contrary, increased to 2.3% from 1.9%.

At the same time, the country has seen an increase in imports of goods by 46.1%, which turned out to be higher than analysts' forecasts, who expected an increase in imports by 45.7%. Exports also increased (by 19.4%), which also exceeded expectations of 17.5%.

Of the companies included in the calculation of the Nikkei 225 index, Nikon, Corp. (+2.5%), GS Yuasa, Corp. (+2.4%), as well as Fujitsu, Ltd. (+2%) noted an increase in the value of securities.

Some support for the Asia-Pacific indices was provided by US indicators, which closed the day before with an increase of up to 1.5%. The growth of US indicators is primarily due to the good results of quarterly reporting of companies, especially among the technology sector.

Of the components of the Hang Seng Index, Country Garden Services Holdings, Co., Ltd. (-6.4%), Longfor Group Holdings, Ltd., (-5.3%), China Resources Land, Ltd. (-4.4%), as well as Haidilao International Holding, Ltd. (-2.2%) were marked by a drop in quotes.

The companies that form the basis of the calculation of the Korean KOSPI, on the contrary, showed an increase in the share price. Thus, Samsung Electronics, Co. securities gained 1.5%, and Kia Corp. at 0.5%.

The largest companies from Australia show a drop in quotes: BHP Group, Ltd. securities fell by 1.7%, and Rio Tinto. Ltd. by 2.8%.

While the price of Zip Co. shares rose by 13% after the announcement of the company's plans to optimize its operations in the international market for profit.

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The dollar remains the first violin in the EUR/USD pair, and the euro is afraid to make a mistake



The beginning of this week once again gave the dollar confidence in its strength, which cannot be said about the euro. The latter expects to bounce back after a series of losses, but fears a new decline. Many experts believe that the euro has no room for error.

Currently, the greenback continues the difficult path to strengthening. On Monday, July 25, market participants are preparing for a sharp increase in interest rates in the US (by 75 bp to 2.25-2.5% per annum). This is expected to take place on Wednesday, July 27th. In the current situation, the market is dominated by the risks of a decline in economic growth, so investors once again go to safe assets, in particular, gold and the dollar.

The current economic situation is characterized by the greenback's rise against key world currencies, primarily the euro. On the morning of Monday, July 25, the latter sank a bit in anticipation of information about the business climate in Germany. According to preliminary calculations, this indicator fell to 90.5 points from the previous 92.3 points. Against this backdrop, the EUR/USD pair was trading at 1.0200, retreating from the previous session's closing level of 1.0210.



The current situation negatively affects the exchange rate of the single currency. Last week, the European Central Bank raised its base deposit rate by 50 bp after eight years of negative interest rates. At the same time, the consensus forecast suggested an increase of only 25 bp. According to experts, the ECB's decision is due to concerns about further acceleration of inflation. Against this background, the risk of a possible recession, which was previously relevant, fades.

A further rate hike is planned by the ECB on September 8 this year. At the same time, the pace of monetary tightening by the ECB is very different from those of the Federal Reserve. According to analysts, this figure is significantly behind the results shown by other global central banks. Recall that last month the Fed raised the rate by 75 basis points and is now ready for similar actions.

According to ECB President Christine Lagarde, such a decision is explained by the need to combat galloping inflation, primarily with a large-scale increase in food and energy prices. We note that the target inflation rate is likely to exceed 2%, as inflation in 19 eurozone countries is approaching double digits. In the event of a serious shortage of gas in winter, a further increase in energy prices is possible, experts emphasize.

The ECB officials also agreed on additional assistance to major eurozone debtor countries, including Italy, and introduced a new bond purchase scheme (TPI). Its goal is to prevent an increase in the cost of borrowing for EU member states in the course of tightening the monetary policy of the central bank. When launching this tool, the ECB focuses on public sector bonds with maturities of 1-10 years.

In this situation, the ECB does not rule out a slight devaluation of the European currency. The bank believes that moderation will not hurt the euro. We note that this process is proceeding smoothly, despite the weak economic outlook for the eurozone amid dependence on energy imports.

The strengthening of the dollar contrasts sharply with the fluctuations of its opponent in the EUR/USD pair. According to analysts, the strengthening of the greenback is a pro-inflationary factor for the global economy. However, now a strong USD is not beneficial even to the American authorities, who are actively fighting inflation, which has exceeded 9%. At the same time, only the US authorities can stop the dollar's growth, experts are sure.

A strong US currency negatively affects the ability of developing countries to service their external debts, a large part of which is denominated in USD. In such a situation, their maintenance requires a large number of national currencies. A weak greenback allows the countries of emerging markets to repay their debts in time and in full and increase trade.

The current cycles of strengthening and weakening the dollar are confusing market participants. At the moment, the growth of the USD exchange rate is working to reduce inflation and cool the economy, following the current Fed strategy. In addition, the current situation works for the authority of the greenback, strengthening its position.

In the coming months, the dollar's growth will be uneven, with occasional technical rollbacks. However, the US authorities can stop it at any time. This is possible in the event of a sharp reversal of the current cycle of tightening monetary policy. However, the Fed is unlikely to take such measures amid raging inflation, experts believe.

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The euro raises its head, trying to knock the crown off the dollar



The euro is looking for ways out of the price impasse, into which it has been driven by economic instability and recent parity with the American one. At the same time, the greenback remains the winner in the EUR/ USD pair, despite a short-term subsidence. The US currency was near multi-year highs on Tuesday, July 26, amid expectations of a Federal Reserve rate hike. Recall that the central bank will hold a meeting on Wednesday, July 27, at which it is highly likely to increase the interest rate by 75 bp. This measure is necessary to curb the ever-growing inflation. If the Fed leaves the greenback in limbo after the meeting, then this will be the best option for the euro. However, such a scenario is unlikely, experts warn. One of the euro's trump cards against the dollar is the risk of an approaching recession in the United States, Rabobank currency strategists believe. The bank's specialists have revised the current forecasts for the EUR/USD pair downwards. Analysts believe that by the end of the summer, the single currency may fall to 0.9500 relative to the greenback. As for the planning horizon in the next six months, Rabobank expects the pair to recover to the level of 1.0500. The EUR/USD pair was cruising near 1.0227 on Tuesday, July 26,, recouping previous losses. According to preliminary calculations, another wave of weakening of the greenback is possible at the beginning of next year.



Investors prefer safe assets in the current situation, primarily gold and USD. As a result, the latter is steadily rising in price. According to analysts, in anticipation of a downturn in the global economy, the demand for safe-haven assets is going through the roof. This provides impressive support for the dollar and reduces the euro's chances for further strengthening.

It is difficult for the euro to hold the gained positions amid the steadily growing greenback. The pain point for the euro, as well as for its rival in the EUR/USD pair, is galloping inflation. Recall that since the beginning of 2022, the single currency has dipped in relation to the greenback by 12%. At the same time, inflation in the euro area updated records for eight months: in June, price growth in the EU amounted to 8.6% year on year.

Some experts believe that the weakening of the euro is not an economic, but a political problem, due to the desire of the United States to dominate the world market. In this scenario, there is no place for a strong and independent Europe, whose currency is able to successfully compete with the dollar. "There is an exciting power play behind the current devaluation of the euro," said Feng Xiaohu, a columnist for the Chinese edition of Huanqiu Shibao. According to the expert, the euro's decline is due not only to economic factors. The political ambitions of the United States is in first place, since the euro is the main obstacle for the greenback, which prevents American authorities from "making profit from all over the world."

At the beginning of the week, experts recorded investors' flight from risk in the markets amid concerns about the onset of a global recession. Many analysts believe that the recession is the Fed's payment for curbing inflation, which has already accelerated to 9%. At the same time, market participants believe that the Fed will be able to take control of it. According to experts, there are signs of an impending recession in the US economy. However, they will not prevent the central bank from bringing the federal funds rate to a neutral level.

Many experts warn against misinterpretation of the coming recession in the United States, warning of its destructive power. According to Nouriel Roubini, one of the leading economists who predicted the financial crisis of 2008-2009, one should not count on a mild recession in the American economy. According to the analyst, it will be deep "amid a serious drop in GDP and debt and financial crises."

The growth of the key rate and the huge debts of the American economy, which have reached peak values, add fuel to the fire. At the same time, the debt burden of developed countries is growing, increasing the risks of stagflation, Roubini emphasizes. Recall that stagflation is a combination of an economic downturn with rising prices.

The current tightening of the monetary policy of the Fed and other central banks has a negative impact on the value of assets around the world. Most stock markets are experiencing a downturn, pulling the crypto industry with them. In such a situation, the US currency is the winner, justifying its status as a safe asset. According to the calculations of analysts at Standard Chartered Bank, almost 45% of the strength of the greenback is due to its status as a safe haven currency.

Despite the high probability of further strengthening, USD may decline in the coming weeks due to the Fed's current strategy regarding rates. In the current situation, the market has taken into account the entire cycle of tightening of the monetary policy in prices, but the major players continue to aggressively bet on the greenback's succeeding growth.

At the same time, representatives of the Fed note that they do not plan to raise the rate to 1.00%. The Fed intends to limit itself to an increase of 0.75%, which is fully taken into account in market prices. A potential rate hike of 1.00% will be a surprise for the market and will support the dollar, but such a scenario is unlikely. At the same time, the euro will try to maintain its recent upward momentum, not counting on a further decline in the greenback.

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US stocks closed lower, Dow Jones down 0.71%



At the close of the New York Stock Exchange, the Dow Jones fell 0.71%, the S&P 500 index fell 1.15%, and the NASDAQ Composite index fell 1.87%.

3M Company was the top performer among the components of the Dow Jones index today, up 6.63 points or 4.94% to close at 140.75. Quotes of McDonald's Corporation rose by 6.71 points (2.68%), closing trading at 257.09. Coca-Cola Co rose 1.02 points or 1.64% to close at 63.21. The biggest losers were Walmart Inc, which shed 10.04 points or 7.60% to end the session at 121.98.

Salesforce.com Inc was up 3.85% or 6.83 points to close at 170.46 while Nike Inc was down 3.73% or 4.08 points to close at 105. ,twenty.

Leading gainers among the S&P 500 index components in today's trading were 3M Company, which rose 4.94% to 140.75, General Electric Company, which gained 4.61% to close at 71.51, and shares of Archer-Daniels-Midland Company, which rose 4.36% to end the session at 78.92.

The biggest losers were Fortinet Inc, which shed 7.77% to close at 56.26. Shares of Walmart Inc lost 7.60% to end the session at 121.98. Quotes of Carnival Corporation decreased in price by 7.41% to 8.50.

Leading gainers among the components of the NASDAQ Composite in today's trading were Ayala Pharmaceuticals Inc, which rose 94.25% to hit 1.69, Pagaya, which gained 73.11% to close at 16.74, and Freight Technologies Inc, which rose 67.57% to end the session at 2.48.

The biggest losers were Revelation Biosciences Inc, which shed 51.39% to close at 0.49. Shares of Luokung Technology Corp lost 41.19% to end the session at 0.24. Quotes of Exela Technologies Inc decreased in price by 36.43% to 1.85.

On the New York Stock Exchange, the number of depreciated securities (1938) exceeded the number of closed in positive territory (1172), and quotes of 122 shares remained virtually unchanged. On the NASDAQ stock exchange, 2,320 companies fell in price, 1,412 rose, and 242 remained at the level of the previous close.

The CBOE Volatility Index, which is based on S&P 500 options trading, rose 5.69% to 24.69.

Gold futures for August delivery lost 0.21%, or 3.55, to hit $1.00 a troy ounce. In other commodities, WTI September futures fell 1.48%, or 1.43, to $95.27 a barrel. Brent oil futures for October delivery fell 0.71%, or 0.71, to $99.48 a barrel.

Meanwhile, in the Forex market, EUR/USD fell 0.99% to hit 1.01, while USD/JPY edged up 0.15% to hit 136.87.

Futures on the USD index rose 0.67% to 107.07.

News are provided by
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