“Risk off” theme continues – stocks plunge, US Dollar gains, commodities slump. Pound gets crushed after UK mini-budget

Macroeconomic/ geopolitical developments

• The key focus last week was the Federal Reserve Open Market Committee (FOMC) decision, statement and press conference on Wednesday. This brought an anticipated 75bp rate hike, but also a more hawkish tone than markets had anticipated, with rates possibly now moving to a higher peak in 2023 up to 4.50% and staying elevated.
• In addition, downbeat comments from Fed Chair Powell assisted to the “risk off” move in global assets.
• Powell stated “no one knows whether this process (of raising rates) will lead to a recession or, if so, how significant that recession would be.”
• The Bank of Japan (BoJ) Japan intervened in the Forex market to support the Yen for the first time since 1998 after after USDJPY moved above 145.00.
• The UK mini-budget saw tax-cuts, the cancellation of national insurance and corporation tax increases, supply-side reforms, plus a GBP 60 billion energy support package.

Global financial market developments

• The major US stock averages suffered prominent losses last week for a second successive week.

• European and Asian equity indices were also appreciably lower.
• US 10yr yields moved up through the June and 2022 yield peak.
• US Dollar strength renewed and extended, DXY hit a new multi-decade peak.

• USDJPY was erratic with the BoJ intervention, but still aims higher.
• GBPUSD plunged post the UK mini-budget to another new multi-decade low, as the Pound slumped across the FX board.

• Gold hit further new multi-month low.
• Oil plunged Friday to another new multi-month low, with risks still lower.
• Copper sold off for a bear tone.

Key this week

• Central Bank Watch: A quiet week for Central Banks, but Federal Reserve Chair Powell speaking on Tuesday, and we also get the Bank of Japan (BoJ) Meeting Minutes earlier that day.
• Macroeconomic data: Also, a relatively quiet week for data with US Durable Goods Orders, GDP and PCE the standouts, with the UK GDP, plus German CPI, Retail Sales & Unemployment also released in Europe.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued