July 7, 2022/Capital.com

“The week’s big news is the resignation of the British Prime Minister. The pound did rally on the news – but nothing too earth shattering.  The driver behind pound (and of course, euro) weakness this year has been dollar strength rather than any local political problems.  A change of leader in the UK is probably unlikely to be the cause of any major recovery in the pound from its current depressed levels.  The ongoing inflation concerns and the real threat of a global recession continue to be far more important in the mind of markets.

The energy markets have been very much in focus this year following the Russian invasion of Ukraine and the impact that the soaring of oil and gas have had on inflation and the resultant cost of living crisis. The volatility seen regularly in crude oil makes it a popular one amongst traders – and the last couple of days have been no disappointment on that front.  Tuesday saw oil drop almost 10% in one day – its largest one day fall since March. Concerns about the ongoing slowdown in the global economy – and the real risk of China slipping into recession  – spooked traders into thinking this could really impact  demand for crude oil later this year.  A 10% fall in one day makes for an eye-catching headline, but whenever oil has traded below $100 a barrel since Russia’s invasion it has not stayed there for long. It will be an interesting market to watch over the next few days to see if bargain hunters step in – or whether this is actually the start of a more sustained sell-off in crude after more than two years of relentless gains.

Once again the tech-biassed NASDAQ 100 index has proven to be the most popular with our clients over the past week.  There’s been plenty of day-to-day volatility, but very little actual change from where the NASDAQ ended in June. At the moment, 90% of Capital.com’s global trader community who have an open position in this index are long – speculating that the price is going to rise. Buying the dips was a very profitable strategy through much of 2021 – but it has of course been a different story this year with the index down by more than 25% for the year to date. Of course there will come a point where all of the bad news and expectations for potential further rate rises get discounted into the price and maybe the 11,000 lows hit in June could prove to be a temporary base for the NASDAQ100  – but traders should remain aware that this year has ultimately seen any rallies run out of steam.  Any bounce from here may mean traders have to be nimble to book any profits in case the index turns down once again.”