Regulatory action against cryptocurrency exchange platform Kraken had a cascading effect on digital assets as their prices stumbled.
Forex
Source: Bloomberg.
The EUR/USD pair fell for a second successive week as the euro ended the week at 1.0677 USD. The US dollar rose the highest on Monday, riding on the resounding non-farm payrolls (NFP) data and the 25 basis points rate hike by the US Federal Reserve (Fed) announced last week.
Fed chief Jerome Powell, in his remarks on Tuesday, 7 February, reiterated the need for further policy rate hikes this year. However, he also acknowledged an easing in inflationary pressure, raising investors’ hope for a policy pivot in the future.
The strength in the USD kept the GBP/USD pair to a marginal gain over the week, and the pair closed last week at 1.2058 USD. The British pound sterling wasn’t helped by the gross domestic product (GDP) data released in the United Kingdom on Friday, 10 February, that showed a stagnant economy in the final three months of 2022.
On the events front, the Customer Price Index (CPI) data in the US is scheduled to be released on Tuesday, 14 February. Crude oil inventories and retail sales data are set for a Thursday, February 15, release. Meanwhile, Producer Price Index (PPI) data — which calculates the variation in the cost of goods manufactured and sold — will be released a day later on Friday, February 16.
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Commodities
Source: Bloomberg.
Gold prices maintained their level from the week prior to close last week at 1,865.69 USD. The precious metal rose to nearly 1,890 USD on Thursday, 9 February, before it lost all of its gains under bearish pressure.
A slew of data releases — especially the inflation data — slated for this week will have a bearing on the price movements of the precious metal. The US Fed’s rate hike decisions are heavily dependent on the direction of inflation in the country.
After successive weeks of slumps, US crude oil prices rose almost 9% for the week and reached nearly 80 USD a barrel on Friday, 10 February. Among the reasons for the rise was Russia’s Friday announcement of a production cut in March by half a million barrels per day, in response to the sanctions imposed on the country in the wake of the war in Ukraine.
Cryptocurrencies
Source: Bloomberg.
Action taken by the Securities and Exchange Commission (SEC) against cryptocurrency exchange platform Kraken last week had an immediate impact on the industry as major digital tokens traded in the red. The global cryptocurrency market capitalisation stood at 997 billion USD on Sunday, 12 February.
The SEC reached a 30 million USD settlement with Kraken that will force it to wind up a programme offering investment returns to its American users who committed digital assets to the company. In a complaint on Thursday, 9 February, the SEC alleged that the practice, known as “staking”, reflected an unregistered offer and sale of securities. According to the regulatory body, Kraken failed to adequately disclose the risks of participating in the programme, which had advertised annual yields as high as 21%.
Meanwhile, Bitcoin, the world’s largest digital currency by market capitalisation, was trading at 21,789.80 USD at the time of writing. The second-most traded cryptocurrency, Ethereum, also lost its key support level at 1,600 USD and was trading at 1,515.34 USD.
In a significant development, banks in the European Union are required to place the maximum possible risk weight on cryptocurrency assets under a draft law published by the European Parliament on Friday, 10 February. Under the law, banks would have to disclose their direct and indirect exposure to cryptocurrencies. Meanwhile, the European Commission is also preparing more fine-grained rules for the sector. Such regulatory action in the cryptocurrency market will likely contain the volatility often seen in the space.
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US stocks
| Name of the index | Friday’s close | *Net change | *Net change (%) |
| Dow Jones Industrial Avg (Wall Street 30) | 33,869.27 | -56.76 | -0.17% |
| Nasdaq (US Tech 100) | 12,304.92 | -268.44 | -2.13% |
| S&P 500 (US 500) | 4,090.46 | -46.02 | -1.11% |
*Net change and net change (%) are based on the weekly closing price change from Friday to Friday.
After gaining 6.2% in January, the S&P 500 fell 1.11% last week, making it the index’s biggest weekly drop since December 2022. The Nasdaq, which had risen for five consecutive weeks, was down 2.13% last week. Meanwhile, the Dow Jones slipped a marginal 0.17%.
Stocks that took a beating in 2022 have been surging this year so far. However, analysts predict that the trend won’t last long, with the looming Federal Reserve rate hike uncertainty as it attempts to keep inflation in check. Netflix, which fell 51% last year is up 18% this year, while Meta Platforms stock has gained 45% in 2023 after a steep 64% fall last year.
As the fourth-quarter earning season is heading to a close, analysts have subdued forecasts for the first-quarter — which companies begin reporting in April. It follows the general trade for the first month of a quarter, however, the average reduction is more than what has been seen over the last 5 years.
The Consumer Price Index (CPI) report, which is scheduled to be released on Tuesday, 14 February, will show whether inflation extended into January. Investors will also be keen on the retail sales data due to be released on Wednesday, 15 February.
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