Financial Markets’ Weekly Recap: June 19-23

The euro fell on Friday after data indicating stagnation in the growth of business activities in the single currency area this month, while the dollar received support from risk aversion and statements indicating continued monetary tightening from global central banks, including the Federal Reserve (Central US).

The dollar index, which measures the performance of the US currency against a basket of six currencies, rose 0.56 percent, recording 102.95, erasing losses recorded for three consecutive weeks. The euro fell 0.85 percent to $1.0859 and was on track to record its biggest daily loss since March.

The latest data showed business growth in the euro zone almost faltered in June, as a contraction deepened in the manufacturing sector and activity in the main services sector in the region barely grew, with an overall decline in demand for the first time since January.

Sterling struggled to hold on to gains made by the Bank of England’s decision on Thursday to raise interest rates by 50 basis points, in a more than expected move, to counter persistent inflation, fueling fears in Britain of a recession.

High interest rates usually support currencies, but the risk that they will lead to an economic downturn has prompted some investors to look for safe-haven assets such as the dollar.

Sterling fell last 0.31% to $1.2710, and is heading for a weekly loss of nearly 1%, after gains for three consecutive weeks.

The Australian and New Zealand dollars also suffered in Asian trading as risk appetite declined.

The Australian dollar fell 1% to $0.6688 and is on track to record a weekly loss of more than 2.5%, the worst weekly performance since March. The New Zealand dollar fell 0.58 percent to 0.6141 US dollars, and lost about 1.5 percent during the week.

Federal Reserve Chairman Jerome Powell said on Thursday that the US central bank will move interest rates again, albeit at a “cautious pace”.

Money markets expect by 74 percent that the US central bank will raise interest rates by 25 basis points at the monetary policy meeting next month, after leaving them unchanged at the previous meeting.

The Japanese yen was largely flat at 143.05, hovering near a more than seven-month low of 143.23 against the dollar, which it hit in the previous session.

The Japanese currency is under increasing pressure as the Japanese central bank sticks to its ultra-loose monetary policy.

Markets in China are closed on Friday for the holiday.

Europe

European stocks fell on Friday, at the end of a week full of central bank decisions on monetary policies, which reinforced views that interest rates may remain high for a longer period, and Siemens Energy shares tumbled after it withdrew its annual profit forecast.

The pan-European STOXX 600 index closed down 0.3 percent after data showed euro zone business growth faltered this month as the manufacturing sector slowed further.

The index’s losses amounted to 2.9 percent for the whole week, marking the worst weekly performance in more than three months, as investors absorbed interest-raising decisions from large central banks, including those of England, Norway and Switzerland, with the specter of inflation remaining high for a longer period.

Investors are also worried about the impact of extended monetary tightening cycles on the global economic recovery, with fears of a recession in Britain exacerbated after the Bank of England raised interest rates by 50 basis points, which exceeded expectations.

Germany’s DAX index fell 1 percent, incurring the biggest loss among its regional peers, with Siemens Energy shares falling 37.3 percent.

The company, which supplies equipment and services to the energy sector, warned that quality problems at its Siemens Gamesa wind turbine unit would affect it for years.

US

US stocks closed lower on Friday, ending a week dominated by testimony from Federal Reserve Chairman Jerome Powell, in which he indicated the possibility of another rate hike but pledged that the central bank would exercise caution.

The three main indices of the market fell in a broad selling wave, and the Nasdaq Composite Index was affected by the decline in the shares of large companies that are vulnerable to interest movements.

The Nasdaq snapped an eight-week winning streak, the longest since March 2019, while the S&P ended its five-week winning streak, its longest winning streak since November 2021.

The Standard & Poor’s 500 and Nasdaq recorded their biggest losses in percentage terms from Friday to Friday since early March, when the market was affected by the liquidity crisis in US local banks.

Gold

Gold prices recovered on Friday, supported by a decline in US Treasury yields and an appetite for safe-haven assets. However, the position of Federal Reserve officials, which tends to raise interest rates, means that gold is on its way to incurring a second consecutive weekly loss.

And by 1425 GMT, spot gold rose to $ 1927.90 an ounce, after falling close to the lowest level in three months earlier in the session. The yellow metal fell 1.5 percent during the week.

And US gold futures rose 0.8 percent to $ 1938.20.

Wall Street’s main indices fell and are expected to incur weekly losses after comments by US Central Bank President Jerome Powell and other officials fueled fears that interest rates will continue to rise for a longer period.

The yield on the US benchmark ten-year Treasury bond fell to its lowest level in ten days, which reduces the municipal opportunity cost of owning non-yielding gold.

As for other precious metals, spot silver rose 0.9 percent to $ 22.44 an ounce, but it is on its way to recording the largest weekly loss since October 2022.

Platinum fell 0.3% to $920.38, on track to record its worst weekly performance since August 2022. Palladium fell 0.5% to $1,277.46, after hitting its lowest level since May 2019 in the previous session.

Oil

Oil prices fell at the settlement on Friday, recording a weekly loss, as investors worried that raising interest rates may lead to a decline in demand for oil, despite signs of declining supplies, including a decline in US crude oil inventories.

Brent crude fell 29 cents, or 0.4 percent, to settle at $73.85 a barrel, recording a loss for the second day in a row. West Texas Intermediate crude fell 35 cents, or 0.5 percent, to $69.16.

On Thursday, Brent crude lost nearly $3 a barrel after the Bank of England raised interest rates by half a percentage point more than expected. The central banks of Norway and Switzerland also raised interest rates.

Both benchmarks fell more than 3.5 percent for the week.

And the possibility of raising interest rates again in the United States has become more likely. San Francisco Fed President Mary Daly said the expectation of two more rate hikes this year is “very reasonable.”

Investors’ aversion to risk has also boosted the value of the dollar, putting pressure on oil prices, making them higher for holders of other currencies.

The US inventories report for this week showed a sudden drop of 3.8 million barrels in crude oil inventories.

The market is also expected to witness a decrease in supply after Saudi Arabia cut its production by one million barrels per day in July, which was announced by the Kingdom, in addition to the OPEC + alliance agreement to limit supplies until 2024.

Turkey

Turkey’s central bank took new steps on Sunday in line with its goals to increase the efficiency of market mechanisms, after it raised interest rates to 15 percent from 8.5 percent this week.

On Sunday, the central bank said Turkey’s securities maintenance regulations had been simplified to enhance the effectiveness of market mechanisms and support macro-financial stability.

He stated in a statement that the decision comes within the framework of the policies announced after the last Monetary Policy Committee meeting on Thursday, and that the simplification process will continue gradually.

According to an announcement in the country’s official gazette, the securities maintenance rate that Turkish banks are required to set aside for their foreign currency deposits has been reduced to five from ten percent.

With the new regulations, the securities that banks must maintain ranged from three to 12 percent of their lira deposits. It previously ranged between three and 17 percent.

The new regulations also stipulate that banks whose deposits in pounds are less than 57 percent of total deposits will have to hold an additional seven percentage points of securities.