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Second half starts with more declines in stocks, yields

“Live each day as if your life had just begun.” – Johann Wolfgang Von Goethe 

 

 

HEADLINES

 

 

  • Sterling slumps 1.5% vs dollar on safe-haven demand, weak UK data
  • Gold heads for weekly dip as hawkish central banks dull appeal
  • Oil jumps nearly 3% as supply outages outweigh recession fears
  • Second half starts with more declines in stocks, yields
  • Five reasons bitcoin had its worst quarter in more than a decade
  • USD/JPY: Narrower spreads should steady the yen – Scotiabank
  • USDJPY Near Term: Downside favored

 

Sterling slumps 1.5% vs dollar on safe-haven demand, weak UK data

 

 

Sterling slumped on Friday against the dollar and was set for its worst week against the greenback in a year as renewed fears of a global recession coupled with UK weak economic data knocked the British currency.

After its biggest six-month decline since 2008 against the U.S. dollar, risk-sensitive sterling briefly dipped below $1.20 against a strengthening U.S. dollar and was last1.5% lower at $1.2000, .

Against another safe-haven, the Swiss franc, sterling plunged to its lowest level since March 2020, down 0.8% to 1.1530.

 

 

COMMODITIES

 

 

Gold heads for weekly dip as hawkish central banks dull appeal

 

 

Gold fell on Friday en route to a third straight weekly dip as a firm dollar and looming rate hikes soured appetite for the non-yielding asset, while India’s import tax hike on bullion also dampened its demand prospects.

Investors also seemed to prefer the safety of the dollar amid growing recession fears on Friday, with the currency’s gains also making gold more expensive for overseas buyers.

Hawkish monetary policy from top central banks had pushed gold, which bears no interest, to its worst quarter in over a year.

Meanwhile, India, the world’s second biggest bullion consumer, raised its basic import duty on gold to 12.5% from 7.5% in an attempt to lower trade deficit.

 

 

ENERGY

 

 

Oil jumps nearly 3% as supply outages outweigh recession fears

 

 

Oil prices rose nearly 3% on Friday as supply outages in Libya and expected shutdowns in Norway outweighed expectations that an economic slowdown could dent demand.

Brent crude futures were up $2.71, or 2.5%, at $111.74 a barrel by 1:26 p.m. EDT (1726 GMT), while West Texas Intermediate crude (WTI) gained $2.81, or 2.7%, to $108.57 a barrel.

Both contracts fell around 3% on Thursday, ending the month lower for the first time since November. For the week, Brent was on track for a loss of 1.2%, while WTI was set to rise 0.9%.

 

 

STOCKS

 

 

Second half starts with more declines in stocks, yields

 

 

The second half of the year started with more declines in global stock indexes on Friday as recession concerns that have built in recent weeks also dragged down Treasury yields and metals.

U.S. Treasury yields tumbled on market expectations that U.S. consumer prices will come down close to the Federal Reserve's inflation target.

The yield on 10-year Treasury notes fell 17.9 basis points to 2.795%, while the two-year yield, which typically moves in step with interest rate expectations, slid 19.4 basis points to 2.733%. Both were at four-week lows.

 

 

Five reasons bitcoin had its worst quarter in more than a decade

 

 

Bitcoin just had its worst quarter since 2011 and its worst month on record.

The world’s largest cryptocurrency lost about 58% of value in the second quarter of 2022. Around $1.2 trillion has been wiped off the entire cryptocurrency market.

Amid the chaos, crypto firms have announced layoffs and the industry is moving toward consolidation via acquisitions.

 

 

ANALYSIS

 

 

USD/JPY: Narrower spreads should steady the yen – Scotiabank 

 

 

“We think that the apparent cap on US yields should be modestly JPY supportive and help stabilize the recent yen decline.”

“We noted that USD/JPY spot trends (higher highs) is diverging with the daily RSI (lower highs). This divergence is a classic sign that a move may be poised to reverse. There are scant signs of a reversal in terms of pure price action, however.”

“Firmer resistance is developing in 136.75/00 but the USD will have to trade below 134 at the moment in order to signal some (even modest) downside pressure is developing.” 

“Given the extent of the USD rally so far this year, we are attentive to signs of a more significant reversal ahead of the 140 zone which we think may be around the limit of the USD rise in this cycle.”

 

 

CHART

 

 

USDJPY Near Term: Downside favored

 

 

Technical View: Short position below 136. Target 134.5. Conversely, break above 136, to open 136.65.

Comments: The pair breaks below support.


 

 

Source: Trading Central 

 

 

 

CALENDAR

 

 

*Times in GMT

Source: FX Street Economic Calendar


Footnotes

https://www.reuters.com/markets/us/safe-haven-demand-knocks-risk-sensitive-british-sterling-2022-07-01/
https://www.reuters.com/article/global-precious/precious-gold-heads-for-weekly-dip-as-hawkish-cenbanks-dull-appeal-idUSL4N2YI2MW
https://www.reuters.com/business/energy/oil-prices-rise-after-falling-3-previous-session-2022-07-01/
https://www.reuters.com/markets/europe/global-markets-wrapup-1-2022-07-01/
https://www.cnbc.com/2022/07/01/bitcoin-btc-posts-worst-quarter-in-more-than-a-decade-5-reasons-why.html
https://www.fxstreet.com/news/usd-jpy-narrower-spreads-should-steady-the-yen-scotiabank-202207010659