The Euro fell to its lowest level for two decades against the US Dollar last week as worries over the state of the global economy continued to intensify. The Dollar has been incredibly strong this year, driven by a combination a rising US real interest rates and a deterioration in the macro backdrop. Inflation data has also been a major influence over sentiment with last week’s headline US CPI reading hitting 9.1%, the highest figure for more than 4 decades . After declining by a further -0.9% over the course of the week, the Euro concluded Friday’s trading at parity with the Dollar.
Volatility remained elevated last week with Wednesday’s US inflation figure sparking a sharp sell-off in equities before markets staged a comeback on Friday. Overall, most of the leading indices recorded a negative week with the Shanghai Composite in China posting the largest decline, a -3.8% fall the result of weak economic data. In the US, the S&P500 and tech heavy NASDAQ fell by -0.9% and -1.6% respectively whilst domestically, the FTSE100 ended the week -0.5% lower. Across the Channel, the MSCI Europe ex UK index declined by -0.7%.
It was an eventful week in the sovereign bond markets, noticeably the US where the inversion of the 2-year/10-year part of the yield curve widened to a two decade high . Many macro commentators view an inversion of that magnitude as a key signal for recession with short dated debt yielding more than longer term securities due to growing near term risks. The US 10-year declined by 17 basis points (bps) to 2.93% with the UK equivalent gilt falling by 15bps to 2.09%.
In the commodity markets, oil slipped for a third consecutive week with Brent crude declining by -5.5% to $101 a barrel. Copper prices also continued to weaken sharply in the face of a weaker global economic outlook and sluggish Chinese GDP data. The metal slumped by -7.9% to $7,178 a tonne having briefly dropped below the $7,000 mark for the first time since Q4 2020. 
It’s busy week for UK focused economic data, the standout of which is CPI inflation which is expected to have a risen once again during June (the headline forecast is 9.3%). Unemployment, retail sales and flash manufacturing PMIs are also due throughout the week. In the US, the housing sector comes back into focus with building permits, housing starts, and existing home sales released across Tuesday and Wednesday. Moving to the Eurozone, the European Central Bank hosts its monthly monetary policy meeting on Thursday with its Executive Board expected to raise rates by 25bps to 0.25%. In terms of data, flash PMIs are expected to reveal another slowdown in growth during the first few weeks of July. The Bank of Japan also hosts a policy meeting this week although unlike its peers in Europe and the US, no changes to interest rates are expected. There are no major macro figures due from China on this occasion. 
 bls.gov, 18/07/22
 T.Rowe Price, 18/07/22
 Refinitiv, 18/07/22
 Forex Factory, 18/07/22
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