Date: 17/07/2024
Written by: Patrick Czerka
As we enter the second half of 2024, economic statistics and market trends continue to influence investor attitude and financial strategy. Last week observed a mix of cautious optimism and increased anxiety, spurred by key data releases and global economic trends. Here’s a look at the most important economic events that have occurred during the last week, including currency fluctuations, gold prices, key stock indices, and cryptocurrency market developments.
With weaker-than-expected data on manufacturing and construction spending, the US economy appeared to be slowing down. The manufacturing index of the Institute for Supply Management (ISM) decreased from 49.2 in April to 48.7 in May, indicating a contraction in the sector. In addition, after falling by 0.2% in March, construction spending fell by 0.1% in April.
The market’s conjecture that the Federal Reserve may lower interest rates later this year has been stoked by these events. As more people come to believe that the central bank will need to move to help the economy, market expectations for a September rate drop rose to 59.1% from 55% the week before.
A three-week low was reached by the US dollar as a result of the weak economic statistics, which caused major volatility. The dollar index, which compares the US dollar to a group of six important currencies, decreased 0.4% to 104.14. Driven by the dollar’s decline, the euro gained 0.5% versus the dollar to hit $1.0897. Similarly, the UK GDP growth was greater than anticipated, which helped the British pound gain 0.4% and trade at $1.2799. The Japanese yen experienced notable volatility, with the yen rising by about 3% on Thursday as a result of possible intervention by Japanese authorities to keep the value stable.
Despite persistent economic instability and the weakening of the dollar, gold prices remained resilient. Changes in market sentiment helped gold as investors looked for safe-haven assets. The appeal of precious metals persisted, particularly in light of prospective central bank monetary easing.
As investor confidence was undermined by worries about the weakening economy and geopolitical risks, US stock futures fell precipitously, especially in the IT sector. The market’s vulnerability to economic data and potential changes in monetary policy was highlighted by the drop in tech stocks. The European stock markets gave a contradictory impression. Expectations of potential monetary policy changes by the European Central Bank (ECB) drove some positive movements, but broader economic concerns kept other sectors cautious.
Last week, there were significant fluctuations in the cryptocurrency market as well, driven by both market patterns and legislative changes. In spite of more general market turbulence, Bitcoin values held steady over the $30,000 threshold. Ethereum showed endurance as well, holding onto its $1,900 price because of consistent demand and further advancements in decentralized finance (DeFi).
The market was still being shaped by regulatory news. Potential approval of Bitcoin ETFs by the US Securities and Exchange Commission (SEC) has been alluded to, potentially opening up the market to a larger pool of institutional investors. Furthermore, debates about central bank digital currencies, or CBDCs, gathered momentum, and a number of nations are considering using them.
The financial events of the previous week highlight the intricate relationship that exists between market movements, investor emotion, and economic statistics. The future dynamics of markets will be influenced by the expectation of central bank activities, especially in the US and Europe. Investors should continue to exercise caution as they monitor economic data and policy cues that may influence the direction of the financial system in the months to come.
Keep an eye on our blog for more updates and analysis as we make our way through these turbulent economic times.
