An inevitable recession in the US, layoffs in the banking industry, and the looming threat of increasing Covid cases have continued to be causes of concern for cryptocurrency traders.
Forex
EUR/USD traded at $1.0735 on Thursday, 15 December, its highest level since early June. The currency pair closed the week under $1.06, holding onto substantial gains.
The US Consumer Price Index (CPI) for November was released on Tuesday, 13 December, with an annual rate of 7.1%, down from the previous month’s 7.7%. It was also below the market expectations of 7.3%. As price pressures eased, the US Federal Reserve announced a 50 basis point rate hike, boosting optimism in the market. The latest rate hike follows four straight 75 bps increases.
The euro rose after the European Central Bank (ECB) announced a 50 basis points rate hike of its own, but ECB president Christine Lagarde was hawkish for a change. Through the end of the Asset Purchase Programme (APP), she announced further quantitative tightening.
On the other hand, with the Fed and the Bank of England (BoE) diverging once again on monetary policy, the GBP/USD pair reversed sharply from a six-month peak, and ended the week marginally lower than at the start of the week.
The macroeconomic calendar this week offers little relevance as we enter the winter holiday season. The most important figures will be the final estimates of the Gross Domestic Product (GDP) in the UK and the US, both of which will be announced on Thursday, 22 December. The core Personal Consumption Expenditures (PCE) and the durable goods orders — which measures current industrial activity — will be released on Friday, 23 December.
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Commodities
Investors evaluated the US inflation report and the Fed’s policy outlook last week, and the latter’s potential effects on global economies caused gold prices to fluctuate wildly throughout the week. There was a 2% drop in platinum for the week, and a 1.9% fall in silver.
Meanwhile, signs of tightening supply and improved Chinese demand helped oil rise to its highest since early October. The oil prices climbed despite downward pressure from interest-rate hikes by the US Fed and the ECB.
After central banks across Europe and North America signaled that they will continue to fight inflation aggressively, oil fell by more than $2 per barrel on Friday, 15 December, amid fears of a looming recession.
As the holiday season approaches, gold prices may find it harder to make a decisive move in either direction due to the thinning trading conditions in the economic calendar.
Cryptocurrencies
It was a volatile week for cryptocurrencies as prices rose following an optimistic CPI report, only to see those gains wiped out overnight. The global crypto market capitalisation now stands at around $800 billion.
A possible announcement of an inevitable recession in the US, massive layoffs in the banking industry, and the Covid pandemic threatening to spread like wildfire once again have continued to be causes of concern for cryptocurrency enthusiasts. More than $117 million in leveraged positions across the market have been blown out, with Bitcoin and Ethereum accounting for the majority of these positions. Following them, Dogecoin and Litecoin were the next largest liquidations, according to data gathered by Coinglass.
Bitcoin’s price slipped on Friday as the US Federal Reserve approved a smaller interest-rate hike (50 bps) than the previous ones this year. The world’s largest cryptocurrency is trading at $16,741.10 at the time of writing. Ethereum — which follows behind Bitcoin as the cryptocurrency with the second-highest market capitalisation — is currently trading at $1,183.32 after reaching a high of $1,319.17 on Tuesday, 13 December.
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US stock markets
| Name of the index | Friday’s close | *Net change | *Net change (%) |
| Dow Jones Industrial Avg (Wall Street 30) | 32,920.46 | -556.00 | -1.66 |
| Nasdaq (US Tech 100) | 11,243.72 | -319.61 | -2.76 |
| S&P 500 (US 500) | 3,852.36 | -82.02 | -2.08 |
Source: Bloomberg
*Net change and net change (%) are based on the weekly closing price change from Friday to Friday.
The stock market fell as a result of the Fed’s 50 basis point interest rate hike announced on Wednesday, 14 December, which caused the interest rate to reach a 15-year high. Its effect was reflected in the performance of the biggest stock indices in the US.
The Dow Jones Industrial Average dropped 142 points after the Fed’s interest rate hike announcement on Wednesday, and 764 points the following day, resulting in an overall weekly loss of 1.66%. The S&P 500 fell 2.08%, taking up its cumulative December losses to 5.58%. The Nasdaq too traded in the red and dropped 2.76% during the course of the week.
Traders have been hoping for a Santa Claus rally — a sustained rise in the stock market that occurs around year-end holidays. However, it looks like this year’s hopes for a rally have been dampened by the recent events in the financial world.
In the coming week, the PCE price index, which is set for release on Friday, 23 December, is the most significant data that might dictate further movement in the stock market.
The earnings lineup will offer traders the final clues heading into the final weeks of the year, with corporate giants like Nike and FedEx set to release earning reports ahead of the holiday shopping season.
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