Ongoing fears of a possible economic recession fueled by various factors are weighing on the financial markets.

Ongoing fears of a possible economic recession fueled by various factors are weighing on the financial markets.

— June 22nd, 2022

This beginning of this week marks the beginning of the second half of the year. The precedent was economically bleak, with growth forecasts weighed down by the Ukrainian-Russian war, runaway inflation and the resurgence of covid cases in China. To avoid the worst, the various central banks like the United States Federal Reserve have revised their interest rates upwards. However, aggressive interest rate hikes could foster a global economic recession. Stock markets were a little turbulent on Monday because of the July 4th celebration of the independence of the United States.

The Reserve Bank of Australia (RBA) raised rates again by 50 basis points on Tuesday and expects to continue to normalize monetary policy over the coming months. On the same day, risk aversion took hold of the markets. Investors are increasingly concerned that an economic recession is imminent. Uncertainty over Europe’s gas supply, a political crisis in Britain and a new outbreak of COVID-19 cases causing new restrictions in Shanghai are among other vectors of this flow from refuges.

In the currency market, the US dollar is king. The US dollar index hit a 20-year high of 106.79 on Tuesday, buoyed by a falling euro. The Euro fell as low as 1.0237 against the Dollar and may continue lower as there are no significant support levels for EUR/USD down to $1. The security offer also returned to the Japanese yen, which has not been in much demand lately.

Eyes will be on the following economic events this week: the FOMC meeting minutes on Wednesday, the Canadian jobs report on Thursday and the nonfarm payrolls (NFP) report on Friday. We may see retracements in the future days but keep in mind that defense is the best strategy at this time.

Written By Steve Keutcha  –  Head of Trading