Last week was dominated by US economic data, which mostly disappointed. The CPI came in 0.1% lower than expected, and although this was only a tiny miss, markets reacted strongly to it. Fed rate hikes are now not priced in at all, and rate cuts are expected in 2024.

The US dollar lagged all week, and the DXY index fell almost 2% to 103,815. EURUSD closed 2.1% higher, closing above 1.09.

The euro showed little movement (apart from EURUSD) after the economic data for the eurozone produced no surprises.

The Pound had a relatively quiet week. It is worth noting that wage growth in the UK exceeded expectations, but inflation came in lower.

Commodity currencies eventually outperformed when the combination of lower yields and a weakening dollar was a double push to higher levels. The CAD rose 0.5%, the NZD gained 1.7%, and the big winners were the AUD and NOK with gains of 2.5%. Elsewhere in FX, we saw more currencies gain ground against the USD: 1.3% for the JPY, and 1.8% for the CHF.

Oil tried to halt the recent downtrend, but ultimately failed. Last week, WTI fell 1.6% and closed at $76.05.

Precious metals were bound to rally as yields and the USD fell. Gold rose 2.2% to $1,981 and is getting closer to its all-time highs. Silver shot 6.6% higher to $23.72, but we have yet to see a real technical breakout (this level is finally around $26).

Equities certainly liked falling returns, but bulls should be cautious. We are now seeing a rally (seasonal factors also help), but the underlying economic environment is showing signs of severe deterioration. Last week, the S&P500 index rose 2.4% to 4511 points and the DAX gained 3.9% to 15919 points.

Bonds continue their recent strong form. Positioning remains short, and probably means that the path of least resistance remains upward. Last week, the 10y UST yield fell 19bps to 4.44%, and we are approaching significant support around 4.30%. The 10y Bund rose 1% and closed at 130.998 points.

Finally, cryptocurrencies remain volatile as ETF developments remain uncertain. At the time of writing, Bitcoin stands 1.4% lower at $36,500 and Ethereum more than 5% lower at $1,940.

The week ahead:

All eyes will likely be on yields and the dollar next week, as they remain the key drivers of most markets. Is the Fed done raising interest rates? Probably so. But how long will they remain on hold? That is the big question. Regarding data, it is a slightly quieter week, but we still have GDP prints from Germany and Norway, as well as several PMI releases.

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 to completeness or accuracy 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.