Last week’s downturn in risk assets was interrupted when President Trump announced the imminent arrival of a deal. This agreement is expected to lead to the reopening of the Strait of Hormuz and a general reduction in tensions.
Following the announcement, the US Dollar slipped slightly but has been performing better than anticipated. The US CPI figures met expectations, and attention is now focused on the upcoming FOMC rate decision. Last week, the DXY index decreased by 0.3%, closing at 99.806.
The Euro saw a slight increase as the ECB implemented the anticipated 25-basis-point rate hike.
Sterling edged up slightly amid a lack of significant UK economic data. The Bank of England is set to meet next week, with rates likely to remain unchanged.
Commodity currencies experienced a quiet week despite the positive sentiment in risk assets. The AUD remained unchanged, the CAD declined slightly, and the NZD gained 0.6% against the Dollar. In other FX news, both the JPY and CHF remained stable.
Crude oil remained the most volatile asset, showcasing another impressive weekly fluctuation. Following the announcement of the forthcoming deal, oil prices dropped sharply in anticipation of a return to “normality” in the Strait of Hormuz. Last week, WTI fell over 6%, closing at $84.28.
Precious metals are attempting to stabilise after weeks of significant weakness, but will they succeed? Gold dropped by 2.5% last week, closing at $4,219, while Silver rebounded from the $63-$64 support zone, ending the week 0.4% higher at $68.
Bonds recovered most of their losses from the previous week, as optimism regarding the Iran conflict prevailed. The 10-year UST yield fell by 5 basis points to 4.48%, and the 10-year Bund increased by 0.4%, closing at 126.008.
Equities responded positively to the potential Iran deal, with the successful, eagerly awaited SpaceX IPO further boosting sentiment. The S&P500 index rose by 1% last week to close at 7431, while the DAX decreased by 0.5% to 24635.
Finally, cryptocurrencies are outperforming equity markets for the first time in weeks, much to the bulls’ delight. At the time of writing, Bitcoin has risen by 3% to $64,000, and Ethereum is up by 4% at $1,670.
The Week Ahead:
This week promises to be action-packed. On the one hand, we await confirmation of the anticipated Iran deal; on the other, a series of central bank rate decisions loom, including those from the BoJ, RBA, FOMC, SNB, and BoE.
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