Favourable data releases in the United States propelled the US dollar higher, while major cryptocurrencies saw their recent rise stalled.


Forex chart - market report, week 1 Mar 2023

Source: Bloomberg.

The EUR/USD pair was down for the week, closing the week at 1.0546 USD after recent favourable data releases that boosted the US dollar. There was a surprise rebound in the Personal Consumption Expenditure (PCE) Price Index and an upsurge in the households’ spending in January, which raised expectations that the United States Federal Reserve will continue its rate-hiking spree until the summer as it attempts to keep inflation in check. The minutes from the Fed’s meeting — when it announced a 25 basis point hike in the lending rates — showed that Fed officials believe that rate hikes will continue to be a necessity, unless they see more evidence of ease in inflation.

Meanwhile, its fourth quarter gross domestic product (GDP) data showed that the pace of the US economy was slower than anticipated. The US GDP grew at an annualised rate of 2.7% in the latest quarter — 0.2% lower than the estimated 2.9%. Slower rate of consumer spending is one of the reasons for the downward revision to the GDP data.

The GBP/USD plummeted following the release of the economic data in the US and hit a low of 1.1927 USD, closing the week barely above the monthly low. The USD/JPY reached its highest level since December 2022 and reached a peak of 136.46 USD on Friday, 24 February.

A number of important data releases are lined up this week as well. Conference Board (CB) Consumer Confidence data will be released on Tuesday, February 28 and ISM Manufacturing Purchasing Managers Index (PMI) report is scheduled for a Wednesday, March 1 release. Initial Jobless Claims data is due on Thursday, March 2, while ISM Non-Manufacturing Purchasing Managers Index (PMI) numbers will be out a day later on Friday, 3 March.

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Gold chart - market report, week 1 Mar 2023

Source: Bloomberg.

The rally in the US dollar after favourable PCE data spelled doom for gold prices as they tumbled down to 1,814.19 USD at the close of the week. A number of data releases due for next week will further decide the trajectory of the yellow metal.

In the week that marked a year since the start of the war in Ukraine, oil prices remained largely flat, as the possibility of reduced Russian exports provided some support, while mounting inventories in the United States and apprehensions regarding the global economic activity exerted downward pressure on the crude prices.

The US Crude Oil Inventories data — which tracks the weekly fluctuations in the quantity of commercial crude oil barrels stored by US companies — will be released on Thursday, 2 March.


Crypto chart - market report, week 1 Mar 2023

Source: Bloomberg.

Following its spectacular 14% rise in the week prior, Bitcoin started last week strongly and edged close to the 25,000 USD mark, but couldn’t sustain its momentum and lost most of its gains by the end of the week. This happened after top regulators in the US warned banks to guard themselves against liquidity risks posed by cryptocurrency-related clients.

The Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency issued a joint statement on Thursday, 23 February, urging banks to monitor funds placed by crypto-asset-related entities.

Bitcoin, the world’s most popular currency, was trading at 23,398.50 USD at the time of writing, while Ethereum — the second-most traded digital token globally — was trading at 1,639.67 USD. The global cryptocurrency market cap stood at 1.12 trillion USD on Sunday, 26 February.

Meanwhile, the International Monetary Fund (IMF) in a paper titled, ”Elements of Effective Policies for Crypto Assets”, published on Thursday, 23 February, issued a 9-point guidance to countries on ways to deal with cryptocurrency assets, with their first point urging nations against recognising cryptocurrencies as legal tender. Two days later, on Saturday, 25 February, India’s push for regulation of the digital assets industry at a meeting of finance chiefs from the Group of 20 (G20) meeting was endorsed by the IMF and the US.

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US stocks

Name of the indexFriday’s close*Net change*Net change (%)
Dow Jones Industrial Avg (Wall Street 30)32,816.92-1,009.77-2.98
Nasdaq (US Tech 100)11,969.65-388.53-3.14
S&P 500 (US 500)3,970.04-109.05-2.67
Source: Bloomberg
*Net change and net change (%) are based on the weekly closing price change from Friday to Friday.

The 3 major stock indexes in the United States suffered their worst week of 2023 so far. The S&P 500 was down 2.67%, the Dow Jones 2.98%, and the Nasdaq 3.14%. The bigger-than-expected rise in the PCE index and the release of the US Federal Reserve minutes raised fears of monetary policy tightening by the US Federal Reserve, which weighed on the stocks.

It has been a difficult February for the indexes after spectacular gains in January. The S&P 500, for instance, gained 6.2% in January, but has just endured its third successive week in the red. A slew of data releases have amplified worries of the Fed tightening interest rates after a 25 basis point hike in early February as it attempts to battle inflation. Analysts believe that the markets have not sufficiently accounted for the possibility of a recession — which remains a looming threat.

Among the stocks that slid the most, Tesla, Amazon, and Nvidia ended the week in red.

The scheduled release of important data points this week will provide a cue to the direction the markets will take in the near future.

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