The previous week was largely uneventful during the summer, except for Fed Chairman Warsh’s significant move. In his Jackson Hole address, Warsh adopted a hawkish stance, stressing his commitment to maintaining stable inflation. His remarks alarmed markets on Friday, causing yields to rise and risk assets to fall.
The US Dollar rebounded from the prior week’s losses, buoyed by Warsh’s hawkish remarks. The US Personal Consumption Expenditure (PCE) aligned with expectations, remaining above 3% and significantly exceeding the Fed’s 2% target. The DXY index increased by 0.8% last week, closing at 99.677.
The Euro and the Pound moved similarly for another week, with no major economic data surprises.
Commodity currencies fell sharply as the Dollar surged, wiping out the previous week’s gains. The Australian Dollar (AUD) had the smallest loss, while the New Zealand Dollar (NZD), Canadian Dollar (CAD), and Norwegian Krone (NOK) each dropped around 1% against the US Dollar. In other forex markets, the Swiss Franc (CHF) and Japanese Yen (JPY) also fell by approximately 1%.
Oil ended its three-week winning streak, with West Texas Intermediate (WTI) dropping nearly 4% to close at $83.45.
Precious metals performed well until Friday’s Jackson Hole comments led to a sharp reversal, triggering leveraged long positions and causing a significant daily decline. Both Gold and Silver ended the week over 3% lower, at $4,455 and $66.35, respectively. This sharp price drop could present a good buying opportunity for long positions, although bears will need to put in more effort to declare a medium-term peak.
Despite Warsh’s hawkish statements, bonds performed better than expected, suggesting the market may be heavily shorted. The 10-year US Treasury yield remained unchanged at 4.73%, while the 10-year German Bund slightly decreased to close at 123.498 points.
Equities showed resilience, confirming the bullish trend. Warsh’s comments on Friday weighed on many equity indices, but the week remained positive: the S&P 500 rose 0.5% to 7,713, and the DAX climbed 1.7% to close at 26,570.
Lastly, cryptocurrencies maintained their gains from the previous week and ended without any losses. As of now, Bitcoin and Ethereum are 1% higher at $78,000 and $2,450, respectively.
Looking ahead, markets remain jittery following Friday’s Jackson Hole remarks, and we are keen to see if the Dollar and yields continue to rise. This week’s data includes various PMI releases, culminating in the usual Non-Farm Payroll (NFP) frenzy.
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