Week in a Glance: Fed, Bank of England, Crypto, Infrastructure

28 Jun 2021

The past week was quite busy for the financial markets. Traditionally, the highest activity in terms of volatility was observed in the cryptocurrency market. The news around the crypto was mostly negative, starting with the disappearance of two South African brothers, and with them bitcoins worth $ 3.6 billion, to the continued pressure from China on miners (authorities ordered the closure of cryptocurrency mining projects in Sichuan province). They added fuel to the fire as criticism from Nassim Taleb (he stated that the real value of any cryptocurrency is zero, and the blockchain turned out to be a useless technology), and the results of the JPMorgan survey (only 10% of institutional investment firms use cryptocurrencies, while most characterize cryptocurrencies as an asset class by the term "rat poison").

Against this background, there was nothing surprising in the fact that Bitcoin peeped below 30K and did not like what he saw.
The Bank of England left the parameters of monetary policy unchanged.

But the main focus of the markets was not on the Central Bank of Britain, but on the Fed. After the FOMC updated its vision for the future of monetary policy in the US a couple of weeks ago, the markets wanted to see how real the threat of monetary tightening is in the foreseeable future. The week showed that the opinion of officials was divided: a part led by Powell considers inflation to be a temporary phenomenon, but another part thinks that it is time to do something. Moreover, last week the May index of prices for basic personal consumption expenditures rose 3.4% compared to last year, which is the largest increase since 1992.

Despite the fact that the problem of inflation is becoming more obvious, the US stock market last week showed calm and new all-time highs (as if there was no last FOMC meeting). Part of this was aided by President Joe Biden's announcement on Thursday that "we have a deal" on the infrastructure plan.

The coming week, despite the height of summer, promises to be no less eventful. On Friday, statistics on the US labor market including NFP will be published. And on Thursday, OPEC + will decide what to do with oil production: starting in August, production growth is very likely, with all the ensuing consequences for the current extremely high oil prices.