Last week, we said that we expected a de-escalation in the Iran-Israel situation and a relief risk rally, and that’s precisely what transpired. The BoJ kept rates unchanged and remained dovish, which caused the JPY to plummet further. Finally, US economic data didn’t help the “goldilocks” scenario, with GDP falling and inflation rising.

The US Dollar had another constructive week, staying firm even as US economic data disappointed. Last week, the DXY index was flat at just over the 106 level.

The Euro was quiet again, with the ECB remaining dovish and pointing towards rate cuts starting this summer.

The Pound rose against most majors, with the best performance being against the JPY, the USD and the EUR.

Commodity currencies managed to recover most of the previous week’s losses and remained correlated with risk. The NOK rose 0.2%, the CAD gained 0.6%, the NZD rallied 0.9%, and the AUD outperformed with a 1.8% rally against the greenback. Elsewhere in FX, the CHF fell around 0.5%, and the JPY crashed 2.4%.

Oil remains volatile, with big weekly swings (in both directions). Last week, the WTI rose 1.9% to close at $83.64.

Precious metals had previously rallied in the face of Iran-Israel uncertainty, and a de-escalation naturally brought weakness. This is a normal correction following Gold’s big breakout higher, and both metals are likely forming a base before they launch higher. Last week, Gold fell 2.3% to close at $2,338, and Silver crashed over 5% to close at $27.22.

Equities rallied as predicted and could continue higher in the short term. Last week, the S&P500 index rallied 2.7% to close at 5102 points, and the DAX gained 2.4% to 18161 points.

Bonds edged lower for the third week in a row as more 2024 rate cut bets were taken out for the Fed. Last week, the 10-year UST yield rose 5bps to 4.67%, and the 10-year Bund fell 0.6% to close at 130.191.

Finally, crypto-currencies are seeing selling pressure even as risk assets are bid. Will the correlation return next week? At the time of writing, Bitcoin was down 2.8% at $63,400, and Ethereum was 1.6% higher at $3,240.

The Week Ahead:

The week ahead should be busy and volatile once again! The JPY move is affecting markets and could well continue. We also have the FOMC rate decision and Nonfarm Payrolls in the US. We are back to data-watching so that markets will watch every piece of data and react accordingly.

Market Commentary: This communication is for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. All market prices, data, and other information are not warranted as complete or accurate and are subject to change without notice. Any comments or statements made herein do not necessarily reflect those of Coeus Capital. Coeus Capital does not assume any liability whatsoever for the content of this newsletter or make any representations or warranties as to the accuracy and completeness of any information contained in this newsletter.