BoE Raises Rates While US & European Markets Remain Flat

The most significant news pertaining to economic data releases was that of the Bank of England raising the reference interest rate (the base rate) from 4.25% to 4.5% in its ongoing fight against inflation. There was little else by way of economic data that was newsworthy.

Tech Stock Continue to Fuel Resilience

Following on from the previous week, equity markets continued to show resilience, powered on by US tech mega-caps.

Overall, performance was flat in the US markets, with Nasdaq and Russell up 0.5%, S&P flat and Dow down 0.5%. Europe also remained flat. The Asian markets were a mix, with Japan being up by 2% but China being down by 4% (as weaker recovery continues to hit the stock market).

There has been a pattern of higher daily highs and lows in a diminishing range. This type of price action usually leads to a break-out into a new range.

Dollar Recovers Against Major Currencies

The only asset class that had a notable level change was foreign exchange. Despite US interest rate expectations pricing rate cuts contrary to Europe and the UK, the US Dollar started recovering against most major currencies. It had been on a losing streak since the start of the year.

Quite often, a turn in the US Dollar can show the way forward with equity markets: dollar up, equity markets down. This, of course, is not a guarantee. But it has had a decent correlation over the last 18 months or so.