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Interviewed by Dubai TV, Mohammed Hashad, Head of Research and Development at Noor Capital and member of the American Association of Technical Analysts, shed light on the latest developments in the financial markets
There was chaos in the currency markets, and we are talking now about the pound sterling at its lowest level against the US dollar, in a free fall, touching the 1.03500 level. The British pound is losing 22% of its value since the beginning of the year. We also see concerns about possible government measures aimed at financial support, the latest decision up to the British Prime Minister in the most significant tax cut the UK has seen in over half a century.
We also see a split among the monetary policy members in voting to raise interest rates, and this indicates that there may be a conflict between fiscal policy and monetary policy.
There is a possibility that the Bank of England will intervene as well, with losses of 22% along with an inflation level of 10% that I think will force the British government to intervene in the markets soon to prevent the sterling from slipping against the dollar and the rest of the currencies.
euro
The turnout for the Italian elections is currently weak, but all expectations indicate the possibility of a right-wing coalition winning and Meloni. I believe this will pressure the euro until the government is fully formed. As for stock markets, banking, energy, and state-owned stocks are the hardest hit.
financial markets
The week was worrying for stock markets, specifically US stocks; we see Dow Jones at its lowest level since November 2020, and the broader S&P exceeds the record level recorded in January 2020 at 4795.
The main sponsor of the continued decline in stocks is the continued rise in interest rates and the general trend to combat inflation By central banks and continuing. The Fed’s inflation target is 2%, leaving a costly bill leading to a recession. In addition, US Treasury yields continued to rise to their highest level since 12 because the investor is looking for tight security that guarantees him more profits than high-risk investment tools such as stocks.
The investor is looking for good stocks that guarantee profits and diversify the investment portfolio and is now turning to government investment tools such as treasury bonds, but short-term.
Oil
We see a barrel of Oil at around $77 per barrel, which may force OPEC at its next meeting at the beginning of October to reduce production, but the main idea is how much to cut output. We saw a cut of 100,000 barrels per day in the last meeting, but the markets did not respond significantly to this cut. Continuing to raise interest rates and expectations that they will reach 4.4% by the end of the year makes Oil priced in US dollars more expensive for investors who hold other currencies, amid fears of a recession in 2023 and its negative repercussions on the level of demand. I think it will put pressure on prices Oil will be in the coming periods, unless there is a strong intervention from OPEC to raise oil prices.
The effect of the rise will also continue because the opportunity cost becomes more expensive than the US dollar, and therefore the pressure will continue. We should not forget the uncertainty around the Russian-Ukrainian conflict, which is one of the most important reasons contributing to the blurring of the scene around oil prices and energy markets in general.
