IFX Market Report: Tuesday 14th June 2022

The United Kingdom’s economy shrunk in April, the US dollar strengthens, global stock markets make losses and the crypto markets continue their downfall after losing over $200bn over the weekend.

The United Kingdom saw it’s GDP contract by -0.3% in April after shrinking by -0.1% in March. The year-on-year GDP increased by 3.4% however but still remains under the expected 3.9% increase by the Office for National Statistics. It is the first time the economy has contracted for two months in a row since Covid struck and fears of a recession grow as inflation keeps climbing with the price to fill up an average family car recently hitting £100. Industrial production fell as well by -0.6% in April. the good news came from a decrease of the trade balance deficit which now hits $-20.89bn, better than the anticipated £-22.50bn for April.

Global stock markets stumbled as well yesterday amidst fears that the rising consumer prices will be harder to control than expected. The American S&P 500 share index fell by -3.8%, which is more than 20% below its recent most recent high. The Dow Jones share index fell once again by -2.7% on Monday after declining already on Friday, Nasdaq by -4.6%, and the Nikkei Japan by -3%. Meanwhile in Europe, Germany’s Dax fell by -2.4%, France’s CAC 40 by -2.7% and the UK’s FTSE by -1.5%. The declines come as central banks are expected to increase interest rates this week in the US and the UK.

The situation on global stock markets led to the dollar making strong gains as it’s seen as a safe currency haven, putting pressure on other currencies such as the Japanese yen which reached 135 for the first time in two decades, or the British Pound with the rate going as low as 1.2122 this Monday.

Cryptocurrencies and other digital assets are not speared by this bear market which sees Bitcoin falling below the $23,000 mark, its lowest level since December 2020. Over the weekend, over $200bn have been wiped off the entire cryptocurrency market, and its market cap fell below $1 trillion on Monday, a first since February 2021 according to CoinMarketCap. The major withdrawals of crypto saw Binance and Celsius temporarily pause withdrawals yesterday, as investor fear a Terra Luna like scenario. Celsius own coin, CEL, was down by more than 50% over the last 24 hours, and the company went from $26bn worth of assets in October 2021, to $11.8bn as of May 17.

Cable saw the US Dollar make gains thanks to its safe-haven status and bad results in the UK economy. GBPUSD opened at 1.2191 and closed slightly under 1.2133.
GBPEUR saw the Pound make small losses this Monday, again due to poor economic results in the UK, as the pair opened at 1.1693 and closed at 1.1648.
EURUSD also saw the dollar strengthen with global stock markets falling this week. The pair opened at 1.0462 and closed at 1.0408.

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