Last week, a US government shutdown was avoided, and although the FX market remained relatively calm, we observed some notable movements. The RBA increased rates by 25bps as anticipated, but the unexpected development came from the BoE, which decided to keep rates unchanged by a narrow margin.
Last week, a US government shutdown was avoided, and although the FX market remained relatively calm, we observed some notable movements. The RBA increased rates by 25bps as anticipated, but the unexpected development came from the BoE, which decided to keep rates unchanged by a narrow margin.
The US Dollar (DXY) experienced a second consecutive modest weekly gain, but mixed economic data, such as the weak JOLTs figures, continue to exert pressure. This week, the release of US CPI and NFP numbers is expected to increase market volatility. The DXY index rose by 0.5%, closing at 97.681.
The Euro had a mixed performance, with the ECB maintaining its current rates and Eurozone economic data presenting no major surprises.
Meanwhile, Sterling declined due to a surprising 5-4 split in the MPC vote (compared to the expected 7-2), prompting the market to revise its expectations for the next rate cut.
The performance of commodity currencies was mixed over the past week: the NZD and CAD declined slightly, while the AUD rose 0.7% against the Dollar following the RBA rate hike. In other areas of the foreign exchange market, the CHF decreased by 0.4%, and the JPY fell by 1.6%.
Crude Oil (WTI) prices ended their 4-week winning streak. The possibility of a US-Iran agreement is alleviating upward pressure, leading to a 3.4% decline in WTI, which closed at $63.49 last week.
Precious metals experienced significant volatility, with Silver trading particularly erratically. Gold remained relatively stable, asserting its dominance among precious metals with a 1.4% weekly gain, closing at $4,964. Conversely, Silver faced substantial pressure, especially during the less liquid Asian trading hours, with frequent stop-loss triggers pushing prices to intraweek lows of $64. Ultimately, Silver ended the week down 8.5% at $77.94, but current positioning indicates a potential new bullish trend, suggesting that precious metals could post a robust performance next week.
Bonds continue to perform relatively well, with yields yet to breach any significant technical resistance on the upside. Last week, the 10-year UST yield fell by 3 basis points, closing at 4.21% after testing a critical resistance level at 4.29% but failing to break through. The 10-year Bund experienced a quiet week, rising just 0.1% to close at 128.208.
Equities are still not showing any technical indicators of reaching a peak. The potential escalation between the US and Iran is suppressing any rallies, yet the possibility of further easing is providing some support. Last week, the S&P 500 index declined slightly to 6929, while the DAX rose 0.7%, finishing at 24721 points.
Cryptocurrencies remain weak, significantly underperforming compared to risk assets. The week saw substantial selling pressure, with some relief for bulls only appearing on Friday. It’s noteworthy that Michael Saylor’s strategy is currently underwater with their Bitcoin holdings, which could eventually lead to additional selling pressure. At the time of writing, Bitcoin is down 12% to $69,000, and Ethereum is down 15% to $2,080.
