Weekly market recap 12 September 2022 - FTMO®

Slide WEEKLY MARKET RECAP Your weekly global financial markets newsletter Market weekly Recap

12 September 2022

  • The death of Queen Elizabeth II, who passed away on September 8, was a definitive reminder to many in the world that everything changes. And while most people alive today took the Queen for granted, her departure will mean several changes for the United Kingdom and the Commonwealth countries that may involve unexpected costs.
  • For example, after seventy years, new banknotes, coins and stamps are expected to be introduced, and a new King Charles III will replace the Queen. However, since both the coins and the notes with the Queen’s portrait remain in force, introducing new ones with the portrait of Charles III will take several years and will also cost a considerable amount of money.
  • Portraits of Queen Elizabeth II now adorn the currencies of 33 different countries. Canada was the first to put it on its $20 note in 1935, and the UK followed suit in 1960, after the coronation. Since then, up to 26 different portraits have been used in the UK and its colonies. In addition, some countries have updated the Queen’s image to reflect her age, while others have retained her older likeness.
  • On the coins, the Queen’s profile has always been turned to the right, but King Charles’ profile will be turned to the left. This follows the 17th-century tradition of alternating the direction of the monarch’s head with that of the sovereign.
  • Queen Elizabeth II first appeared on stamps in 1966, and more than 220 billion have been printed in more than 130 colours. According to Royal Mail, stamps bearing the Queen’s likeness are expected to be valid until 2023.
  • It could cost nearly £400 million to reprint all 4.7 billion notes in circulation. As well as new coins and stamps, all national anthem songbooks will have to be rewritten, or the royal symbol, which is on everything from police uniforms to post boxes, will have to be changed.

Indices

US stocks continued to fall after Monday’s holiday, but since Wednesday, the mood in the markets has changed, and stocks ended the week in the green after three weeks of declines. The market optimism could have been brought by easing inflation fears or a drop in oil prices. Comments from Federal Reserve Vice Chair Lael Brainard and Cleveland Fed President Loretta Mester that seemed more “dovish” than expected may have also played a role.

European equities built on the positive developments in the US, which were underpinned by efforts by some countries to address the energy crisis. Although the ECB rate decision on Thursday halted growth, European stocks ended the week with modest gains. The pan-European STOXX Europe 600 ended the week 1.06% higher, Germany’s DAX 40 rose 0.29%, France’s CAC 40 advanced 0.73%, and the UK’s FTSE 100 Index increased 0.96%.

US30
+2.66%
US100
+4.05%
US500
+3.65%
GER40
+0.29%

Commodities

Energy commodities continued to fall last week, despite Russia’s reluctance to resume oil supplies to Europe and OPEC countries’ plans to cut oil production quotas by 100,000 barrels per day from October. Thus, fears of a lack of demand due to the economic slowdown prevailed in the markets. The EU’s planned price cap (which the EU countries have still not agreed on) or the unloading of strategic stocks in the US, which has the minimum amount of oil in storage since 1984, are also likely to play a role.

Gold
+0.29%
Silver
+4.54%
BRENT
-0.80%
NATGAS
-8.59%

Forex

The euro fell deeper below parity on Monday after Russia suspended gas supplies. However, in the end, the level around 0.9876, the lowest in 20 years, proved to be a strong support. Furthermore, the ECB’s historical 0.75% interest rate hike helped further the rise and tested the 1.01 level.

The Japanese yen continued to fall again to 24-year lows. The pace of the Japanese currency’s decline, however, is already making even traders who have been profiting from the decline nervous. “We think we are getting close to an inflection point of policy,” said BlueBay Asset Management chief investment officer Mark Dowding, referring to the fact that inflation in Japan has already started to rise. “We think the slide in the yen has gone too far too fast, and we think that we will hear something from policymakers pretty soon.”

EUR/USD
+0.93%
USD/JPY
+1.67%
GBP/USD
+0.64%
USD/CAD
-0.81%

Macro

The main news of the week was, of course, the ECB meeting and the monetary policy decision. As expected, the central bankers eventually raised rates by a record 0.75%. However, the markets were particularly surprised by a significantly hawkish statement from ECB chief Christine Lagarde, who said the ECB would raise rates at the next two to five meetings due to a very elevated inflation outlook. “This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to the ECB’s 2% medium-term target,” Lagarde explained in her official statement.

GDP in the Euro Area expanded by 4.10% in the second quarter of 2022, compared with the same quarter of the previous year. On a quarterly basis, the EA economy grew by 0.8%.

We saw somewhat contradictory PMI data in the services and non-manufacturing sectors in the US. The data from S&P Global fell more than expected to 43.7, while the ISM numbers came in above expectations at 56.9. We also saw worse than expected numbers in the EU and UK, which means that the service sector in Europe is not doing very well at the moment.

What to watch out for this week

  • The main topic of the week will be inflation. Inflation is expected to fall in the US, with prices falling by 0.1% month-on-month and from 8.5% to 8.1% year-on-year. Core inflation is expected to rise by 0.3% month-on-month and, on an annualised basis, is expected to increase from 5.8% to 6.1%. PPI is also expected to decline by 0.1% MoM, while core inflation is expected to rise by 0.3%.
  • In the UK, prices are expected to rise 0.6% month-on-month, with core inflation expected to grow up to 0.8%, an extreme jump. Year-on-year inflation is expected to rise at 10.2%, with core inflation rising from 6.2% to 6.3%.
  • In the EU, prices are expected to rise by 0.5% month-on-month, with the year-on-year figure rising from 8.9% to 9.1%. The ECB’s 0.75% rate rise should certainly not be reflected; we could see that in the coming months.
  • In addition, we still have the UK unemployment figures, which are expected to be flat at 3.8%, and the ZEW Indicator of Economic Sentiment for Germany, which for August has fallen to its lowest level since October 2008 and is expected to fall further.
Day:
Impact:
Restrictions:
Description
Instrument
Dates
GMT +2
Forecast
Previous

Join the team

of our experienced traders

FTMO Challenge Free Trial

Disclaimer

All information provided on this site is intended solely for the study purposes related to trading on financial markets and does not serve in any way as a specific investment recommendation, business recommendation, investment opportunity, analysis or similar general recommendation regarding the trading of investment instruments. The content, in its entirety or parts, is the sole opinion of FTMO and is intended for educational purposes only. The historical results and/or track record does not imply that the same progress is replicable and does not guarantee profits or future profitable trading records or any promises whatsoever. Trading in financial markets is a high-risk activity and it is advised not to risk more than one can afford to lose!