The euro was little changed against the dollar after the ECB decided to raise its interest rate by 50 bps for the first time in the last 11 years. The looming energy crisis depressed the euro on Tuesday.
The British pound rose last week on better-than-expected UK PMI prints, which reaffirmed market expectations for a 50 bps rate hike by the Bank of England in August. However, the political stalemate is not nearing to an end in the UK. Two conservative candidates, Liz Truss and Rishi Sunak are fighting to replace Premier Boris Johnson who will soon leave office. In addition, the controversial Northern Ireland Protocol Bill could trigger a trade conflict with the European Union.
The Japanese yen strengthened after the Bank of Japan affirmed its “business as usual” policy of providing tremendous liquidity into the financial system.
Gold prices slightly recovered after falling deeply below the $1710 level. Investors have repriced the odds of an increase in interest rates from 100 to 75 basis points and also rate cuts in 2023. This helped oversold gold find a floor.
All major US stock indexes were little changed consolidating one-day gains from last week. The Q2 earnings season is in full swing with Tesla reporting an excellent second quarter. Apple and Amazon are expected to report its quarterly results on Thursday.
Oil prices were choppy but little changed last week. Oil traders’ sentiment is swaying between concerns about supply-side instability and expectations for weaker fuel demand under the pressure of a more negative global economy. Russia tightened its gas squeeze on Europe on Monday providing support for crude oil prices too. Some believe that higher gas prices, triggered by Russia's gas squeeze, may lead to additional switching from gas to crude.