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It Has Been A Week To Remember

By Craig ErlamStock MarketsJun 17, 2022 10:40AM ET
www.investing.com/analysis/it-has-been-a-week-to-remember-200625945
It Has Been A Week To Remember
By Craig Erlam   |  Jun 17, 2022 10:40AM ET
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I think we’ve all earned a weekend break in the sun after an extraordinary week in the markets that saw plenty of central bank action, even from those not scheduled to meet.

Stock markets are ending the week on a positive note, not that anyone is getting carried away with today’s price action after turbulent trading conditions in recent days. Triple witching may also be a factor in today’s moves, which is another reason not to get excited.

Recessions are increasingly likely as central banks race to dramatically raise rates before inflation spirals out of control. It is better than the alternative though – stagflation. It is a term that’s been thrown around way too much in recent months, which perhaps highlights the trepidation around it. We are not in a stagflationary environment, nor will we be later this year. But the risk of one is rising, which is why central banks are becoming increasingly accepting of their actions tipping the economy into recession.

There are a few exceptions, obviously. The Bank of Japan doesn’t have an inflation problem. In fact, it’s just about hitting its target thanks to high energy costs, but that won’t last. Its issue is a result of everyone else’s inflation problem, with the BoJ being forced to buy huge amounts of bonds on a daily basis as part of its yield curve control (YCC) tool. Although on Friday, it received no bids, which may bring some short-term reprieve.

The central bank remains committed to its YCC despite the pressure its ceiling has come under in recent weeks and the impact it’s had on the currency. Barring a sudden SNB-style U-turn, it would appear the BoJ is not even entertaining the idea of throwing in the towel. Pressure will continue to mount in the weeks and months ahead, but FX market intervention is likely to come before the BoJ abandons its YCC policy.

From Bad To Worse For Bitcoin

Bitcoin is showing some resilience around $20,000 which is being touted as a massive level. A break of it could be disastrous for bitcoin and the broader cryptocurrency space which would likely track it lower. How much longer can it hold? The constant flow of negative headlines – Celsius, Binance – in the current environment has been devastating for cryptos, and now reports of Three Arrows Capital failing to make margin calls could lead to others surfacing in the coming weeks, spreading further negativity. It could get much worse before it gets better.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

It Has Been A Week To Remember
 

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It Has Been A Week To Remember

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Comments (2)
RR RR
RR RR Jun 18, 2022 11:44PM ET
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And the coming weeks will be to remember. Until BTC gets to $0
jason xx
jason xx Jun 18, 2022 4:46PM ET
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Everyone is an expert. All the crypto collapses tie back to Luna which is clearly a crime. Everyone is selling for losses out of a growing cult of paranoia. Volatility works both ways and you don't have recessions when unemployment is at 3%. Ever consider inflation dissipating as supply chains recover from 3 waves of covid.
Kurt Heck
Kurt Heck Jun 18, 2022 4:46PM ET
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Inflation is from the huge stimulus packages. Its also what caused shitcoin to spike upwards. Now that the Fed put the brakes on, the shitcoin is heading toward its true value of zero.
 
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