Markets Weekly Recap

Markets Weekly Recap

*OspreyFX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.

Key Takeaways

• Stocks swing both sides as investors are uncertain over Fed’s policy stance
• Cryptocurrencies went through a flash crash on Wednesday, $300bn wiped off the market

Stocks, currencies, commodities and cryptocurrencies, all went through turbulent times this week. Assets across all markets were rattled by various factors, such as rising inflation, economic reports, government warnings, and general fear and uncertainty over the future of assets’ valuations.

The stock market traded mixed throughout the week, dropping the most on Wednesday during regular hours. By the end of the day, major indexes had erased most of the losses and ended modestly in the red. At its lowest point, the Dow Jones slipped nearly 600 points but pared the losses and closed lower by about 160 points on Wednesday. The same day, Nasdaq Composite dropped almost 2% at its session low. Investors were quick to buy into the lower levels and the tech-focused index ended the session flat.

Near the end of the week, stocks traded slightly positive but were still pressured by the lingering uncertainty whether high inflation will be transitory, as the Fed expects, or it will become entrenched. Mid-week, the FOMC minutes arrived, containing Fed officials’ views on the state of the economy and the outlook for recovery. In the meeting summary, the policymakers have expressed confidence that inflationary pressure will blow over against the backdrop of a strengthening economy. Some Fed officials, on the other hand, have said they want to discuss a plan to adjust and lower the pace of asset purchases.

As a result of the hawkish stance by the FOMC, the US dollar rallied across the currency board on Wednesday. The EUR/USD slipped to levels near 1.2150, but as the week progressed, the exchange rate was lifted back near the weekly highs above 1.2220. The GBP/USD also dived on the day of the FOMC minutes release but, later, bulls took charge and brought the pair near the 1.42 level.

On the cryptocurrency front, the crypto asset market experienced its own “Black Wednesday” this week. Major cryptos, including Bitcoin, nosedived more than 30%, after fear spread across crypto circles that Chinese regulators have banned all financial companies from dealing with cryptocurrencies or being involved in any way with digital assets. The news wiped over $500bn off the market on Wednesday, but before the close, most digital assets bounced back and ended the session significantly above their session lows. Still, more than $300bn disappeared from the total crypto market capitalization.

Digital currencies spent the next two days struggling to gain upside momentum but remained relatively subdued as market participants remained cautiously optimistic.