In the six months that global equities and cryptocurrencies have fallen as inflation and inflation have risen, financial markets have certainly had an impact.
The stock index (DXY) is on an amazing bull run, reaching a 20 -year high at the end of June and rising above the international competition.
Meanwhile, FX traders have seen the Japanese yen (JPY) rise to 24-year lows, currencies such as the Norwegian krone (NOK) on a slower pace, and the Swiss franc double. printed with the Euro (EUR / CHF), not previously made since January 2015.
Capital.com shares what we’ve seen from major investments, as well as what to look forward to in the coming months.
Currency Index (DXY).
American currency
The first part of the review: The index rose above 105 in June, a level that was later broken in November 2002.
The currency’s strength came from its second position as a heap of money amid market volatility, and the cost of the Federal Reserve’s rate hike, which was faster than the previous ones. partners such as the European Central Bank (ECB).
The higher the interest rate the higher the income because it means a country will need to attract more resources and therefore the demand for its money will be higher.
The meaning of the second half: “I believe the greenback has room to increase its earnings in the summer, rather than signs of a significant upswing to drive a major turnover,” said Yohay Elam, the top rating on FXStreet, at Capital.com.
Piero Cingari, an analyst at Capital.com, agreed that the second half could reduce the flow of money.
“While US interest rates will continue to rise at a rapid pace, which is good for the greenback, there will be a slowdown in US economic growth, with the possibility of entering a recession. , can weigh money. in the second act, “Cingari said.
“In recent weeks, the market has started to keep the price from slowing down, due to this rising recessionary crisis.
“Fed futures are projecting prices at 3.3% at the end of the year, up from 3.5% earlier this month. That’s why the market is trading at 150 sources of recent increases until December 2022. However, if the market continues to consider signs of a return that the Fed is expected to lower prices in the future, this is likely to hurt the currency index (DXY).) in the second half of the year.
Euro
The first part of the review: The Euro has been depreciating against the currency since the beginning of 2021, and by 2022 it has fallen from a level of 1.14 to 1.04, leading to speculation that the currency is facing parity.
The burden on him was the European energy crisis following Russia’s invasion of Ukraine; the notion of a depreciation of the euro (although the ECB has downplayed this problem) and a delay in action; and the ECB’s slow move in raising prices as inflation rose to 8.1% in May.
The meaning of the second half: The ECB’s first interest rate hike, by 25 percent, was expected in July – its first increase in 11 years. ECB President Christine Lagarge said she hoped to end the period of bad inflation by the end of the third quarter.
However, Elam said, “The Euro is fragile in taking back the energy crisis and considering European consumers.
“The crisis of the cost of living has set in on European shores – after pushing the UK economy to the brink of collapse – and pushed the ECB on its earlier walking tour. “
But David Jones, chief market analyst at Capital.com, said that while things are looking bearish for the euro, and the trend is declining, there could be signs of the trend starting slowly. search for EUR / USD.
“The last time the EUR / USD was very low, at the end of 2016, was a major turning point for the Euro and we see a rally in the next 12 months. A review could be expected. Technology of further moves has come down, as it did not reach the June low of 1.0360 to the May low of 1.0350.
“We’ve seen very strong markets in the US currency, but we can see a pull and a surge in currencies like the euro.”
See David Jones’s full EUR/USD analysis and trading tips here:
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Japanese Yen
The first part of the review: 2022 can be described as a hot year up to the yen.
What started as a depreciation was avoided by officials as a viable option and good for the Japanese economy as it maintained a strong currency depreciation at the time it was announced. his opponents at the beginning of the siege became very nervous.
Officials now say the currency’s move – with the currency rising from 115.14 to 135.44 this year – has made it harder for companies to make adjustments as the rise begins. of increasing housing.
However, the Bank of Japan upheld its policy at its June meeting.
The meaning of the second half: Now at least, “It’s your friend” says Kenneth Broux, FX strategist at Societe Generale, after the dovish outcome of the June meeting.
However, various analysts believe that the Bank of Japan may not be able to hold on to its current path.
As Elam predicted, “I think inflation will hit Japan after a year, the Bank of Japan will move its ultra-loose policy, which will result in a stronger yen. All in all, there is. room for more current trends in the summer, rather than a major change in currency trends in September.
Piero Cingari of Capital.com has called on the Bank of Japan to stop talking about the entry into the financial market and signal an increase in interest rates or a departure from the motivational activity.
“The end of the world is the answer, because the yen has done well during the recovery period, but still, the time has not come,” he said.
Paona
The first part of the review: The situation for sterling, which has fallen to its lowest level since the onset of the disease in the first half of the year, is not the same (albeit close).
While the Bank of England has been the biggest hit, the UK has reported the highest inflation rate in the G7 with slower economic growth and inflation forecasts. , putting stagflation fears ahead and in the middle.
The meaning of the second half: “The pound was previously sold on a lot of bad news, and the market didn’t pay much attention to the BoE’s rise, citing inflation rising 1.7% in five sessions. coming, ”said Cingari.
“If the BoE surprises the market with stronger -than -expected increases, the pound is likely to benefit.”
He added that in order for the GBP / USD exchange rate to remain stable, the BoE would have to work harder than the Fed – but the big question was whether it could do so with significant inflation. of the economy, as the BoE predicted. .
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