Last week’s developments fueled optimism for a potential agreement with Iran, which positively influenced the markets. Oil prices decreased as a result, and equities trended higher, further supported by inflation figures coming in lower than anticipated.
The US Dollar dipped slightly amid the possibility of resolving tensions with Iran, while US economic data painted a mixed picture: PCE met expectations, GDP was weak, and the Chicago PMI was strong. Consequently, the DXY index dropped 0.4%, closing at 98.942.
The Euro experienced a varied week, influenced by Eurozone inflation figures that were mostly below expectations. The British Pound had a relatively stable week, trading sideways against major currencies.
Among commodity currencies, results were mixed: The CAD saw slight declines against the Dollar, while the AUD rose 0.8% and the NZD surged 2.4% following a hawkish stance from the RBNZ. In other foreign exchange movements, the JPY remained steady, while the CHF decreased by 0.5%.
Crude oil prices plummeted as the potential Iran deal could facilitate the movement of ships through the Strait of Hormuz, causing WTI to drop nearly 10% and close at $87.75.
Precious metals are still seeking a stable ground, with Gold rising by 0.7% to $4,540 and Silver declining by 0.3% to $75.28.
The bond market enjoyed a second consecutive strong week amid continued optimism about Iran, with the 10-year US Treasury yield falling 12 basis points to 4.44% and the 10-year Bund climbing 0.7% to 126.251.
Equities, having sought out reasons to rally in recent weeks, received a boost from potential progress with Iran, maintaining a bullish outlook with no technical signs of reversal. The S&P 500 index climbed 1.4% to a new all-time high of 7,580, and the DAX increased by 0.9%, closing at 25,104. Shorting this market has proven challenging and remains so until evidence suggests otherwise.
On the other hand, cryptocurrencies are notably weaker than equities and other risk assets, with Bitcoin and Ethereum both down approximately 4% and priced at $73,500 and $2,015, respectively.
Looking ahead, the markets are keenly anticipating a definitive resolution to the conflict in Iran. Although there has been significant discussion in the US, the final decision seems to rest with Iran, raising the question of whether this will turn into a buy-the-rumour-sell-the-fact scenario once it is resolved. It’s a busy week for data, with various PMIs and the anticipated NFP on Friday.
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