Stock Market
US and European stock futures are bouncing off yesterday’s low after tanking due to the ongoing concerns that a sharp rate hike by the Fed could result in further economic weakness. The S&P has declined over 9% during the past three days as traders and investors continue to sell riskier assets. What we are seeing is a flight to safety. Still, at the same time, it is tough for traders to find safety in this environment as pretty much everything is falling, including gold and Bitcoin. Speaking of Bitcoin, the crypto getting is getting crushed and isn’t miles away from testing a critical price level.
Economic data
Regarding the economic docket, we have the German ZEW Economic Sentiment due at 09:00 GMT, and the expectations are for -24.5, while the previous reading was at -29.5. The two biggest challenges for the German economy are the ongoing conflict between Russia and Ukraine. And the other important factor is the never-ending saga of covid lockdown and fading hopes of economic activity returning to pr-covid levels in China.
Later in the day, we will see the new reading of US PPI m/m coming out at 12:30 GMT. The forecast is 0.8%, while the previous reading was 0.5%.
Brexit and Sterling
As for the Sterling and the US dollar pair, there is no shortage of bad news or, shall we say, self-inflicting injuries. The UK has set a bill to override the Northern Ireland section of the Brexit deal. This means a trade war between the EU and the UK could potentially occur. Remember, it took the UK and EU over two years to hammer out the details of the Brexit deal concerning Northern Ireland. The fact that UK lawmakers have positioned the country for another self-inflicting injury would mean more trouble for the UK’s economy.
Bitcoin
Crypto investors are shaking after the recent sell-off in the bitcoin price, which was long coming because the Bitcoin price wasn’t moving higher, and over the last two months or so, every single rally has been full of disappointments. We have seen so much fear in the crypto market because Celsis has placed restrictions on clients withdrawing their assets, but traders are worried that other crypto players can adopt the ongoing practice. If other players adopt a similar stance, it could bolster the sentiment in the crypto world as the bank-run phenomena will finally be put in place.
Remember, at any time in history when there is serious panic in the market, we have seen financial lawmakers add restrictions on the withdrawal of fiat currency to stop the panic. I think the same logic here could also spur some confidence among traders, and if other players adopt a similar move, we could see a bottom forming for the bitcoin price fairly soon.
Gold
The precious metal took some serious beating yesterday as the price fell off a cliff due to the strength in the dollar index. The main factor driving the gold price up and down is the strength or weakness of the US dollar. Speculators believe that the Fed could be increasing the interest rate by more than 50 basis points this week. Still, the odds are strong that the Fed will deliver what they have communicated with the market payers, which is an interest rate hike of 50 basis points.
The upcoming US PPI reading is expected to print another strong reading, which means more pressure on the Fed to control inflation, which could push the dollar index further.