Last week’s market events were marked by ongoing drama, with the Iran situation escalating further. However, Sunday brought another social media post from Trump hinting at a potential agreement, making it challenging to keep up with the dynamic developments. The markets seem to be becoming desensitised to each new headline. The Federal Reserve decided not to change the interest rates, and there was central bank action to stabilise the yen amidst its recent decline.
Following the FOMC meeting, the US Dollar weakened as markets had previously assessed a 33% chance of a rate hike. The DXY index fell by 1.6%, closing at 99.802, maintaining a broad sideways pattern.
The Euro and Pound strengthened against the Dollar but weakened against the Yen. Although the Bank of England maintained steady rates, three members dissented, favouring a hike.
Commodity currencies benefited from the Dollar’s decline, with the Australian Dollar (AUD) and Canadian Dollar (CAD) rising by just over 0.5%, while the Norwegian Krone (NOK) and New Zealand Dollar (NZD) gained about 1.5% against the Dollar. In other currency movements, the Swiss Franc (CHF) rose by around 1%, and the Japanese Yen (JPY) surged 4% following a two-day intervention.
Oil prices continue to exhibit significant volatility, reacting sharply to news. After a strong week, bearish forces took over, with West Texas Intermediate (WTI) crude dropping 4% to close at $86.79.
Precious metals remain under pressure, with shorts attempting to suppress gains. Gold saw a slight decline to $4,045, and silver fell 1% to $57.63.
In the bond market, weakness persists amid oil price spikes, although a technical breakout in yields has yet to occur. The 10-year UST yield increased by 4 basis points to 4.72%, while the 10-year Bund yield fell slightly, closing at 124.183.
Equities remained resilient despite the Iran tensions, rising yields, and a mid-week Tech/AI sell-off. Major indices recovered their losses, with the S&P 500 index rising 1% to 7,483 and the DAX climbing 2% to 25,629 points.
Cryptocurrencies struggle to maintain consistent strength, with erratic performances. Saylor’s strategy of selling some Bitcoin holdings adds downward pressure. Currently, Bitcoin is down 1.5% at $63,300, and Ethereum is slightly lower at $1,875.
Looking ahead, will there be follow-through on Trump’s “deal” talk, or will markets experience another volatile period? Next week promises to be complex, with a slew of PMI readings and culminating with US unemployment and nonfarm payrolls data.
