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US Futures Trade Lower

US Futures Trade Lower

U.S. and European stock futures are reversing their gains from earlier this week as the dollar index has climbed once again. A higher dollar index sends a warning sign to investors and traders that the Fed will likely increase the interest rate by 75 basis points in their next meeting, followed by another 50 basis point interest rate hike in their next meeting.

Brexit 

Brexit has made the British economy less competitive, with grave consequences for productivity and wages. According to the research firm, the U.K. will become poorer over the next ten years due to a loss of openness following Britain’s exit from the European Union, with sophisticated manufacturing and parts of northern England taking the most hit. The warning will prompt new inquiries regarding the ability of Prime Minister Boris Johnson to keep his election promise to “level up” the U.K.’s weaker areas.

Energy crisis 

Over the past year, several energy provider failures cost British customers £2.7 billion ($3.3 billion). According to a National Audit Office analysis, that amount will aid in covering the expenses paid by suppliers that absorbed more than 2.4 million clients from more than two dozen of their collapsed rivals. The additional expenses, which will be added to the rising gas and electricity rates expected to affect homes this winter, will be distributed across all energy bills.

Gold 

Although bullion remained traded in a constrained range as investors anticipated new clues from leading central banks on their monetary policy objectives, particularly from the U.S. Federal Reserve, gold prices declined on Wednesday as the dollar strengthened.

Bullion traded in dollars is now more expensive for purchasers holding foreign currencies as the currency climbed approaching recent two-decade levels. Market players are also watching this week’s Fed Chair Jerome Powell’s testimony in Washington, D.C. If Powell is hawkish tonight, the U.S. currency may again strengthen as rates increase. As a result, gold would decline. Otherwise, we anticipate little change in the gold price. A Reuters poll predicts that the Fed will likely increase interest rates by another 75 basis points (bp) in July, 50 bp in September, and won’t start to slow down until at least November. The opportunity cost of owning gold, which pays nothing, rises when interest rates and bond yields rise.

A proposal paper revealed that gold might be one of the assets the European Union may target in a potential new wave of sanctions on Russia.

Oil 

As U.S. President Joe Biden pushed for lower fuel prices, putting pressure on significant U.S. corporations to lessen the burden on drivers during the nation’s peak summer demand, oil prices fell in early trade on Wednesday.

U.S. President Joe Biden is anticipated to call for temporarily suspending the 18.4-cent per gallon federal tax on gasoline on Wednesday, a source familiar with the proposal said, as the country fights to combat rising petrol costs and inflation. Biden had previously stated on Monday that he was debating whether to ask for a suspension of the tax.

On Thursday, Biden will meet with seven oil corporations under pressure from the White House to lower fuel costs as they post record profits. However, Chevron CEO Michael Wirth stated Tuesday that attacking the oil business was not the best method to reduce gasoline costs. In a letter to Biden, Wirth said, “These measures are not conducive to tackling the difficulties we confront,” prompting Biden to respond that the sector was too sensitive.

Despite concerns about inflation, the market is projected to remain tight since supply is anticipated to expand more slowly than demand, as noted this week by trading giants Vitol and Exxon Mobil Corp.

Cryptos 

On June 18, as the continuing sell-off in the cryptocurrency market extended into the weekend, the price of Ether (ETH), the native token of Ethereum, plunged below $1,000. Ether dropped to $975, its lowest point since January 2021, losing 80% of its value after reaching a record high in November 2021. Concerns over the Federal Reserve’s rate boost of 75 basis points, which sent equities and cryptocurrencies into a deep bear market, coincided with the decrease.

Recently, traders and investors have been closely monitoring the price of Ether out of concern that a clear breach below $1,000 would compel them to liquidate heavily leveraged bets. This would increase the downward pressure on Ethereum. The two cryptocurrency loan services, Celsius Network and Babel Finance, which stopped withdrawals due to “market volatility,” appear to blame for the worries.

Ether’s sell-off became more intense after Three Arrow Capital, a cryptocurrency hedge fund with assets worth $10 billion as of May, failed to strengthen its collateral to cover aggressive bets. Terra’s $40 billion algorithmic stablecoin project crashed less than a month before this. A significant amount of money has been taken out of the Ethereum blockchain ecosystem at the time of these events.