Here’s what you need to know for Friday, July 1:
On Thursday, most markets turned to risk. Being the last day of the month, the quarter and the semester, there were some important events that maintain the outlook for the new quarter in relation to global growth.
The weakness of inflation-adjusted consumer spending in the US only adds to these concerns, and in turn, equities and rates are under downward pressure. Yields in the US fell, with the 10-year yield dipping to a low of 2.97%, below the psychological level of 3.00%, some 50 basis points below the highs reached in early June. Equities also weakened, with the S&P 500 down 1%.
In the forex market, DXY extended above 105,000 but fell sharply with the yen rallying as yields fall. The dollar’s rally remains largely intact, given mounting concerns about a global recession, though Thursday’s data was far from impressive and did little to allay concerns that the US economy was sinking into recession.
The most notable data on Thursday were the acceleration of the monthly growth rate of the PCE price index, the constant expansion of personal income and the slowdown in spending growth. Personal income rose 0.5% in May, just as expected after rising 0.5% the previous month.
In other data, the Chicago PMI fell to 56.4 in June, from 60.3 in May. Other manufacturing sector data already released have suggested slower growth or outright contraction. The ISM national index will be published on Friday. Initial jobless claims fell by 2,000 to 231,000 in the week ending June 25, but the four-week moving average rose by 7,250 to 231,750, continuing the chain of gains.
On Thursday, the euro recovered from a two-week low against the dollar, which faltered after new inflation data showed US consumer spending rose less than expected in May. The EUR/USD pair reached a high of 1.0488 and closed the North American session in that area, after reversing a decline caused by growing fears of a recession in the eurozone and the energy crisis caused by the Ukraine war. For the start of the quarter, traders will be watching for eurozone inflation figures to be released on Friday that could give an idea of how aggressive the ECB is in raising rates.
The yen rallied below a 24-year high of 137 against the dollar, although the gap between a dovish Federal Reserve and a Bank of Japan still weighs on the Japanese currency. USD/JPY fell to 135.55. The yen fell 15% against the dollar in the first six months of 2022, marking the worst first-half performance for the currency since 2013.
Gold fell for its worst quarter since early 2021 and retests $1,800. As for cryptocurrencies, bitcoin dipped below $20,000 and the US Securities and Exchange Commission rejected a proposal to list a spot bitcoin ETF by digital asset manager Grayscale. Bitcoin last fell as low as $18,595 and is down nearly 58% in the first six months of 2022, its worst first-half result ever. West Texas Intermediate (WTI) oil also fell sharply on recession concerns.
Source: Fx Street