What a week it has been! Initially, there was widespread optimism about the potential end of the Iran conflict, as US President Trump announced on Friday that an agreement had been reached between the two parties. This led to a rally in risk assets and a sharp decline in oil prices. However, on Saturday, Iran declared that the Strait of Hormuz would remain closed unless it was granted full control over the passage.
The US Dollar declined slightly amid the risk rally, yet it performed better than anticipated, with the DXY index falling 0.5% to close at 98.226.
The Euro and the Pound had mixed outcomes last week, with no unexpected developments in economic data. Both the UK and the EU remain uninvolved in the Iran conflict but are susceptible to fluctuations in energy prices.
Commodity currencies had another strong week as risk appetite grew and optimism spread. The NZD and CAD ended the week approximately 1% higher, while the NOK and AUD gained 1.5% against the Dollar. In other FX news, the JPY increased by 0.4%, and the CHF surged by 0.9%.
Crude Oil prices fell sharply for the second consecutive week, with WTI dropping 12% to close at $83.99. However, the weekend’s developments could influence its movement on Monday.
Precious metals continued their upward momentum for a third straight week. Gold rose by 1.7% to close at $4,831, and Silver soared 6% higher to $80.79.
Bonds rallied as oil prices fell and expectations of central bank rate hikes diminished. The 10-year UST yield decreased by 7 basis points to close at 4.25%, edging close to the critical 4.20% support. The 10-year Bund also rallied, increasing by 0.8% to close at 126.038.
Equities enjoyed a robust week, buoyed by relief following developments in Iran. However, they may face pressure at the start of the next week, as Iran has reclosed the Strait of Hormuz. Last week, the S&P 500 index surged 4.5% to 7130 points, and the DAX climbed 3.8% to 24702.
Finally, cryptocurrencies rallied alongside equities but remain susceptible to negative news and events. At the time of writing, Bitcoin has risen by 5% to $76,500, and Ethereum is up 6% to $2,380.
The Week Ahead:
The situation surrounding the Iran conflict has been a rollercoaster, with the American side declaring victory while Iran remains cautious and disputes many claims. If the Strait of Hormuz stays closed to marine traffic next week, much of last week’s gains might be reversed.
Regarding upcoming data, we have inflation reports from the UK, Japan, Canada, and New Zealand, along with additional PMI releases.
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