The noise
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Cryptocurrency faces another challenge to its legitimacy, as the Securities and Exchange Commission (SEC) announced that it was suing two of the world’s largest cryptocurrency exchanges, Coinbase and Binance on Tuesday. The SEC alleges that both exchanges broke its rules by not registering crypto tokens as securities, meaning that the exchanges were selling unregistered securities to investors, many of whom are retail investors with little to no experience in financial markets.
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The war in Ukraine saw another escalation this week, as the Kakhovka Dam in the Kherson region was destroyed. Kyiv and Moscow are blaming each other for the destruction – Ukraine has alleged the catastrophe was an act of sabotage by Russian forces, whilst the Kremlin has denied this and blamed Ukrainian artillery fire.
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The Bank of Canada (BOC) raised interest rates on Wednesday, bringing the Canadian bank rate up to 4.75%, it’s highest since 2001. This came as a surprise to analysts, who had expected a more dovish stance from the BOC with the consensus forecast being one of no change. The BOC cited resilient consumer spending, continued strong demand for labour, and GDP growth of 3.1% in Q1 as justification for the increase.
The numbers
The nuance
In a week where prime minister Rishi Sunak was engaging in ‘baseball diplomacy’ during a visit to the United States to try to shore up economic ties with congressional leaders, the president of Ukraine, Volodymyr Zelensky, has been dealing with what has been called a ‘war crime’ by NATO member states. Regardless of blame, the destruction of the Kakhova dam represents a significant escalation in the war, and has resulted in one of the worst man-made humanitarian in Europe for decades. Markets have been recovering after the globally impactful factors of the war, such as power and food production and distribution, have stabilised. With the UN’s Black Sea Grain deal and mainland Europe experiencing a milder than typical winter, Putin’s ability to use Russian oil and gas exports and Ukraine’s agricultural production as leverage over the US and NATO member states is no longer at the forefront of investors consciousness, despite the likelihood and the ultimate negative consequences not having diminished.
The hawkish nature of the BOC’s interest rate hikes represents another potential headwind for markets, as the central bank signalled that rate hikes and tightening cycles aren’t going anywhere for now. Investors have been more at ease with the intimations of a pause in rate hikes by the Fed, which resulted in the S&P 500 Index climbing 2.7% over the past week after the news, and which has pushed the Index into a bull market.
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