As markets fear recession, Dollar poised to see third week of sharp gains

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As fears of a global recession were intensified by weak Chinese economic data, the dollar was poised to record its third week in sharp gains.

The dollar index, which measures the currency against six others, added 0.1 per cent on Friday to remain around a 20-year high — taking it up 1.5 per cent for the week.

Boosted by haven buying as well as expectations of the US Federal Reserve raising interest rates again this month, the index has climbed 4 per cent in the past three weeks — its biggest ascent over that timeframe since 2020.

Equity markets: The FTSE All-World index of emerging and developed market shares traded stable on Friday morning. However, it was on track to lose more than 3 percent per week, bringing its year-to-date drop to 22.3%.

Hong Kong’s Hang Seng index, the main Chinese stock market accessible to international investors, fell 2.1 per cent on Friday, taking it 6.5 per cent lower for the week in its largest weekly fall since March 2020.

“It is all about recession risk in the market right now,” George Saravelos, strategist at Deutsche Bank, said in a note to clients, as “the market keeps bringing forward the timing of a recession and (rightly) raises the probability of a hard landing”.

International oil benchmark Brent crude, which on Thursday fell to levels last seen before Russia’s invasion of Ukraine, was on track for a 7.7 per cent weekly loss.

China’s economy Just 0.4% growth in the three months to June, compared with the same period last year, widely missing economists’ expectations for a 1.2 per cent rise amid stringent lockdowns driven by Beijing’s battle to eradicate coronavirus.

Soaring inflation in the US and market expectations of Fed raising interest rates by more than 3.5 percentage next February has been combined with data that shows a downbeat business environment. Darken the economic outlook.

The European governments are now facing a worsening crisis in the cost of living.Russia cuts gas suppliesIn retaliation to western support for Ukraine

In European equities, the regional Stoxx 600 index rose 0.2 per cent in early dealings on Friday, with London’s FTSE 100 up 0.2 per cent and Germany’s Xetra Dax adding 0.3 per cent. Stoxx trades at 16 percent lower than last year.

The euro, whichBelow $1 Earlier this week, the price was steady at $1.001 for the first time since 20 years.

Friday’s rally in government bonds was due to economic uncertainty, which fueled demand for low-risk assets.

The yield on Germany’s 10-year Bund, which falls as the price of the instrument rises and functions as a barometer for eurozone borrowing costs, fell 0.1 percentage point to 1.08 per cent.

The yield on the 10-year note fell 0.04 percentage points to 2.92 percentage percent in US Treasury markets. This is down from around 3.5 percent a month ago.

The two year yield, which tracks interest rate expectations fell 0.05 percentage point to 3.1 percent as futures market forecasts reversed earlier predictions that the Fed would raise its main interest rate by up to 1 percentage percentage point.

Since last week, the yield on the two-year bond has been higher than that of the 10-year bond. This is known as an inverted yield curve pattern. It has historically preceded recessions.

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