Inflation fears drive the market ahead of UK GDP data

FTSE =>The index falls below 7300
BTC/USD => The cryptocurrency falls to a monthly low
USD/JPY => The pair rises above 135.00

FTSE falls ahead of GDP data

The FTSE fell 2.8% across the previous week as stagflation fears sank the market. The OECD warned that the UK would see the weakest economic growth of the G7 major economies. Meanwhile, inflation is expected to continue rising to double digits from its current 9% level. This week is a busy week for UK economic data, with the BoE interest rate announcement due on Thursday. Today UK GDP data is in focus and is expected to show slower growth in the three months to April compared to the three months to March. Weak economic growth could hurt sentiment and pull the index lower. Concerns over renewed lockdown restrictions in China also weigh on risk sentiment.

Where next for FTSE?

The FTSE ran into resistance at 7645 and rebounded lower. The break below the 50 &200 sma and the bearish RSI suggest that there could be more downside to come. Sellers will look for a break below 7235, the May 19 low, bringing 7150, the May low, into target. A break below here creates a lower low. Meanwhile, buyers would look for a move over 7350 the 200 sma to expose the 50 sma at 7500 negate the near-term downtrend.

Bitcoin hits a monthly low

BTC/USD fell for a sixth straight session yesterday, briefly spiking below 27k for the first time in a month. The move lower after a period of consolidation is fuelling expectations that a Bitcoin price crash could be on the cards. A $100 billion was wiped off the crypto assets this weekend after US inflation data on Friday. Expectations that the Fed will turn more aggressive have hit demand for cryptocurrencies, amid an ongoing correlation with macro forces. Bitcoin as a hedge against inflation has long been forgotten. While BTC/USD has moved back towards 29k, a breakout of the current consolidation pattern could open the door to 20k. 

USD/JPY rises over 135.00 after US inflation

USD/JPY rose 2.7% last week, adding to gains of 2.9% the week before as central bank divergence sent the pair to a 20-year high over 134.00. The USD pushed higher last week after US consumer prices unexpectedly increased in May, raising expectations that the Fed will need to raise interest rates faster and harder to tame 40-year high inflation. The Federal Reserve will announce its monetary policy decision on Wednesday and is expected to hike rates by 50 basis points. This is in stark contrast to the BoJ, which remains one of the most dovish major central banks and, with low inflation and low wage pressure is unlikely to start hiking rates anytime soon, keeping the yen out of favour.

Support can be found at 131.40 (May high) and 130.00 (round number).

Resistance for the pair can be seen at 135.20 (2002 high) and 136.00 (round number)