Monday's Markets Update (July 24, 2023)

24 Jul 2023 by rate3

On Monday, NASDAQ dwindled and BTC plunged below 29K as the Services PMI dropped and traders await the Fed's monetary policy decision on Wednesday, with a 25 basis point increase expected.

Details: The Services PMI fell to 52.4 in July, the weakest level since February. New sales growth slowed amid constraints on client spending, including higher interest rates. However, new business from abroad rose at the fastest pace in 11 months. Job creation eased to a six-month low, with companies struggling to attract and retain staff amid rising wage costs. Operating expenses and selling prices continued to rise.

Comment: PMI data showed that the expansion in US services demand slowed significantly in July. This has raised concerns that previously resilient parts of the economy may be starting to feel the effects of the Fed efforts to cool inflation by destroying the demand.

Crypto
Russia: The implementation of the digital ruble has been approved by the President's signature. The central bank digital currency (CBDC) pilot program in Russia will begin on August 1, 2023. This is nearly three years after the Russian government first published a consultation paper on the digital ruble in October 2020. This makes Russia the largest nation in the world to implement a CBDC. Currently, there are three fully-fledged CBDCs: the eNaira in Nigeria, the Sand Dollar in the Bahamas, and JAM-DEX in Jamaica. 93% of central banks showed interest in exploring CBDCs.
Macroeconomics
Ghana: The Bank of Ghana raised its benchmark interest rate to 30% in July 2023, the highest level since 2000, in an effort to curb inflation. Inflation in Ghana has been on the rise in recent months, reaching 42.5% in June 2023.

Currencies
USD, EUR, GBP, YEN: The dollar index (DXY) rose as investors anticipated the Fed's 25 basis point rate hike on Wednesday. The euro and pound weakened ahead of the European Central Bank's and Bank of England's rate hikes on Thursday and Friday, respectively as investors now expect lower than previously anticipated rate increase. The yen strengthened as traders weighed the possibility of the Bank of Japan adjusting its yield curve control policy.

Politics
Spain: Stocks are down after the general election, which resulted in a political gridlock following the massive win of the conservative Popular Party (PP). The PP won 136 seats (+47) in the Congress of Deputies, while the Spanish Socialist Workers' Party (PSOE) — the ruling party — came in second with an increase of 2 seats, to 122. At the same time, the Vox party (ultraconservative) saw a decrease in both popular vote and seats. Overall, the political balance remains precarious, with no party able to secure the 176 seats needed for a majority in the Congress of Deputies.