Cross Asset Forecasts for Q3 2022
If Q1 was difficult for crypto bulls, Q2 was an absolute disaster… As we head into the third quarter, the macro-outlook is still likely to be challenging for crypto, but we could be nearing a cycle low.
The second quarter of the year has been a tricky three months for the Bank of England (BoE) as inflation continued to soar - and is expected to rise further - while growth slowed to a crawl, sparking fears that the UK may enter a recession.
Our Q2 forecast for equities had centered around a mentality shift from a “buy the dip bias” to a “sell the rip” with the Federal Reserve and central banks alike in a tightening overdrive to fight inflation pressures.
The Euro has steadily depreciated against a basket of major currencies since Dec. 2020. Tellingly, that turning point coincided with topping gold prices and the start of a creep higher in Fed rate hike expectations.
As anticipated in the Q2’22 gold forecast, the main catalyst that drove gold prices higher in Q1’22 – the Russian invasion of Ukraine – proved to be a short-lived catalyst.
The Japanese Yen was hammered by markets in the second quarter. USD/JPY shot by the 2002 peak, touching its highest since 1998. A key driver of the Yen’s weakness has been the Bank of Japan’s policy divergence from its major peers.
The price of oil has fallen roughly 20% from the 2022 high ($130.50) as US President Joe Biden takes further steps to combat high energy prices.
The Dollar performed exceptionally well through the first half of 2022 – and more broadly over the preceding year.
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A lot has changed from my Q2 Australian Dollar forecast from being one of the few currencies in the green against the U.S. dollar to almost 4.6% down year-to-date.
GBP/USD has remained humbled since the latter part of last year as the pair continues to be influenced by geopolitics.
At one point last quarter the U.S. stock market was off by about 25%, with all losses coming in the first half of the year.
The euro continued to lose ground against the U.S. dollar in the second quarter, extending the relentless decline that began just over a year ago.
Gold prices head into the start of Q3 trading just above the objective yearly open with XAU/USD still holding multi-year uptrend support.
The Japanese Yen fell more than 10% versus the US Dollar in the second quarter as USD/JPY bulls pressed higher with nearly unrelenting vigor.
Technical forecasts for oil are always challenging as the market is so heavily driven by fundamental factors like demand and supply, geopolitical uncertainty, war, the value of the dollar, the state of the global economy and others.
The bullish USD trend turned a year-old last month. And it can be difficult to put into scope everything that’s happened since then but, just last May, DXY was grinding at the same 90 level that had held the lows at the start of the year.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.