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Inflation, Rising Interest Rates, and Recession Fears keep Market Sentiment Fragile


Due to dismal results from social-media companies and weak economic data, US stocks dropped on Friday, failing to maintain the upward momentum and ending a three-day rise. Snap Inc.’s disappointing performance and Twitter Inc.’s weaker-than-anticipated sales figure have heightened concerns about online ad spending, which is also one of the mounting indications that technology businesses are preparing for a recession.

The Fed meeting this week will be the primary focus for investors, as market sentiment remains fragile in the face of higher inflation, rapidly rising interest rates, and fears of a recession, despite market participants’ expectations that the Fed will take a more measured approach to tighten monetary policy. In the Eurozone, economic activity in Germany’s private sector decreased in early July, according to statistics released on Friday, while the eurozone’s manufacturing PMI went below 50 for the first time in more than two years. The economy of the eurozone is likely to fall in the third quarter, as corporate activity has begun to decline.

Both the S&P 500 and Dow Jones Industrial Average sank on Friday, with the S&P 500 falling for the first time in four days due to recession fears and disappointing tech company reports. The S&P 500 decreased by 0.9% on a daily basis, while the Dow Jones Industrial Average decreased by 0.4%. Eight of eleven sectors remained in negative territory, with the Communication Services and Information Technology sectors losing 4.34 % and 1.38 %, respectively, as the poorest performers. The Nasdaq 100 dropped the most on Friday, falling 1.8%, while the MSCI World index dropped 0.5%.

Main Pairs Movement

The US dollar was little changed on Friday, as it faced additional selling pressure and failed to rise above the 107.3 mark in response to data indicating a decline in early July private sector business activity. After the release of the German Manufacturing PMI, the DXY index inched upward and reached a daily high, but then began to experience fresh selling to extend its daily losses below the 106.2 mark. In July, the US S&P Services PMI fell to 47, which was well below the market’s forecast of 52.6 and indicated a worrying downturn in the economy.

The GBP/USD currency rate increased by 0.16 % on Friday after renewed dollar weakness. In terms of economic data, UK Retail Sales decreased by 5.8 % year-over-year in June, but better-than-expected UK PMIs have relieved some pressure on the Bank of England (BoE). At the start of the European session, the GBP/USD pair plummeted to a daily low below the 1.193 level before regaining upward momentum to recoup all of its daily losses. During the initial half of the day, EUR/USD was surrounded by bearish momentum and weighed down by dismal German PMI data. The pair declined by over 0.15 % for the day.

Gold climbed 0.55 % on the day after reaching a daily high above $1738 in the early US trading session, as the precious metal attracted new buyers in response to a strong decline in US government yields. Meanwhile, WTI oil maintained its downward momentum and fell to around $95 per barrel on Friday, as the reopening of the Nord Stream 1 gas pipeline weighed on oil prices.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
EURGerman Ifo Business Climate Index (Jul)16:0090.2

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