Weekly Recap: 12-16 July

The second week of July was highlighted by the release of inflation data in many parts around the world led by the U.K., the U.S., and the European Union.

The U.S. Consumer Price Index (CPI) jumped 5.4% in June, following a 5% increase in May, with core CPI also rising by 4.5%, in the largest move for this measure since September 1991.

In the United Kingdom, inflation also surged, exceeding the rate targeted by the Bank of England (BoE) in June, with the consumer price index (CPI) reaching 2.5% last month.

Meanwhile, data showed a slowdown in the Eurozone inflation last month, after a steady acceleration in the first months of 2021, while the bloc’s trade surplus narrowed in May due to a decline in exports.

Consumer prices in the European bloc rose by 1.9% in June, easing from 2% in May in the first inflation slowdown since last September.

In Canada, the central bank decided to maintain its main rate unchanged at 0.25% as expected. However, the Bank of Canada decided to reduce the target of its weekly net asset purchases to CAD 2 billion from CAD 3 billion.

Another highlight was the two-day testimony of the U.S. Federal Reserve Chairman Jerome Powell before Congress, in a time when markets are increasingly concerned about the rising inflation amid huge government stimulus and easing monetary policies to help accelerate the recovery from the coronavirus crisis.

Powell’s message to the House Financial Services Committee and then the Senate Banking Committee was simply indicating that the Fed is no rush to raise interest rates in response to a transitory surge in inflation.

Meanwhile, the former Fed Chairwoman and the current U.S. Treasury Secretary Janet Yellen expressed concerns about housing costs, expecting high inflation to remain for several months before easing. Nonetheless, she believes the housing market remains in a better position compared to the time prior to the 2008 market crash.

Earlier, the U.S. Producer Price Index (PPI) rose 7.3% in June from 6.6% in May, exceeding market expectations. Another indicator of the rising consumer prices, the U.S. import price index surged by 1% in June in the seventh consecutive monthly increase. On an annual basis, import prices increased by 11.2% last month.

The U.S. Senate could be voting on the bipartisan infrastructure bill next Wednesday, Senate Majority leader Chuck Schumer said. It is worth noting that the $1.2 trillion plan includes spending on roads, bridges, and other infrastructure projects. The Democrats need the support of at least 10 Republicans to pass the bill.

Dollar

The U.S. Dollar (USD) managed to achieve gains across the board, despite inflation concerns and fluctuations over the course of the week.

The greenback gained 0.98% against the British Pound (GBP) and 0.61% against the Euro (EUR), but lost a marginal 0.04% to the Japanese Yen (JPY).

Economic data provided support for the USD, as initial claims for unemployment benefits in the U.S. during the week ending July 10 registered 360,000 compared with 386,000 in the previous week, a reading that revised from 373,000.

The U.S. Industrial Production expanded by 0.84 on a monthly basis in June.

Data also showed that business inventories increased by 0.5% in May, with businesses aiming to cope with the rising demand. The ratio of inventories to sales rose to 1.26 from 1.25 in April.

Gold

The yellow metal managed to achieve gains on a weekly basis, supported by the increasing demand for safe havens due to growing fears over the surging inflation rates.

On Friday, with the USD struggling for direction after the recent remarks by the Federal Reserve Chair Jerome Powell relatively eased concerns about the recent surges in inflation, the yellow metal fell for the first time in four-session, limiting its weekly rise.

Gold front-month futures added $4.50 over the course of the week, or 0.25%, as it closed at $1,814.50 per ounce.

Oil

Oil prices registered their biggest weekly losses in about two months due to uncertainty about extending the policy agreement among major producers.

Recent media reports suggested the OPEC+ alliance would be extending the current deal until the end of next year, with gradual curbs to the outputs, raising production to respond to demand recovery and maintain market balance.

OPEC expects the global demand for oil will rise by 3.28 million barrels per day to 99.6 million barrels per day in 2022, restoring comparable pre-pandemic levels next year.

Brent crude futures for September delivery finished on Friday at $73.59 per barrel, losing $1.96, or 2.59%, for the week. This marked the biggest weekly drop for the global benchmark most active contracts since the week ending May 21.

Meanwhile, the West Texas Intermediate (WTI) futures closed at $71.81 a barrel, dropping $2.75, or 3.69%, in its largest weekly loss since late March.

The weekly crude oil inventories report contributed to the losses of the U.S. benchmark, despite data by the U.S. Energy Information Administration (EIA) showing the eighth consecutive weekly drop in oil stockpiles, a surprise buildup in gasoline inventories, increasing market concerns about demand recovery.

However, the total U.S. rig count rose by five to 484 in the week ended July 16, its highest level since April of 2020, leveling up by 231 rigs, or 91%, on an annual level, with oil rigs increasing by two to reach 380 by the end of the week.

Stocks

European stocks closed lower on Friday, nearly doubling their weekly losses amid concerns about the resurgence of the coronavirus pandemic with the spread of the Delta Variant.

STOXX Europe 600 lost 1.46 points or 0.32% to close at 454.74, registering its third consecutive daily decline, down for the week by 0.64%, in the biggest weekly loss for the pan-European index in a month.

Meanwhile, the French CAC40 finished the week lower by 1.06%, the German DAX plunged by 0.94%, and the UK’s FTSE100 decreased by 1.60%.

Across the Atlantic, after rising for three consecutive weeks the main indices of Wall Street registered losses, erasing their earlier gains.

The Dow Jones Industrial Average finished at 34,687.85 points, losing 0.5%, while the S&P 500 index closed at 4,327.16 points, plunging by 1% on a weekly basis. Meanwhile, the Nasdaq Composite declined by 1.9% as it settled at 14, 427.24 points by the end of Friday’s session.

Cryptocurrencies

The majority of the leading digital currencies registered weekly losses, with Bitcoin, the world’s biggest cryptocurrency in terms of market capitalization, falling by about 7% as it reached 31,333.

Meanwhile, Ethereum plunged by 12.85%, as it traded near the range of $1,864.

An even larger loss was recorded by Dogecoin that reached $0.1707, dropping by about 22.26%.