Skip to content

Calm Week Shifts as Strong US Data Boosts Dollar and Yields

It was a relatively quiet week, with the primary market mover being the rising tensions in the Middle East. However, Friday’s US data put a spanner in the works! Nonfarm Payrolls beat all expectations, while Average Hourly Earnings and Unemployment beat expectations. As a result, both the US Dollar and yields shot higher and closed the week on a high.

It’s worth noting that most of the NFP gains were in government and healthcare, while private payrolls contracted again. Furthermore, the number of multiple jobholders rose to a new record. Is this a positive sign?

The US Dollarfinally bounced strongly higher, aided by strong US data. The greenback was always going to have a counter-trend rally, and last week may well have been that—the DXY index rose over 2% to close at 102.487.

The British Pound had a forgettable week (apart from the drop vs the USD) as UK economic data remained mixed.

The Euro also fell against the Greenback but was relatively quiet against the other majors. Eurozone inflation and unemployment aligned with expectations, and there was little to move the single currency.

Commodity currencies reversed last week’s gains as the Dollar powered forward. The CAD was the best performer with a 0.5% loss, the AUD and NOK fell 1.5%, and the NZD dropped almost 3% lower. Elsewhere in FX, the CHF fell 2%, and the JPY collapsed over 4.5%.

Oil naturally rallied strongly following the Middle East tensions, anticipating further escalation. Last week, the WTI rose 8.5%, closing at $74.39.

Precious metals were resilient despite rising yields and a strong Dollar. Last week, Gold was flat at $2,654, and Silver outperformed by a 1.8% rally to $32.20.

Bonds were grinding lower for most of the week and collapsed after Friday’s US data. Last week, the 10y UST yield rose 22bps to close at 3.97%, and the 10y Bund fell 0.8% at 133.931 points.

Equities seem to still be in “rally only” mode. If economic data is weak, the expected central bank easing moves them higher. If economic data is strong, the expected economic growth gives them support. So, under what scenario do they move lower? For now, there seems to be no such scenario. Last week, the S&P500 index rallied marginally to close at 5754 points, and the DAX fell 1.8% to 19120 points.

Finally, crypto-currencies proved again last week that they are a good risk proxy. As Middle East tensions escalated and equities fell, cryptos fell considerably more. At the time of writing, Bitcoin is 5.5% lower at $62,000, and Ethereum is 9% lower at $2,430.

The Week Ahead:

We will closely monitor the Middle East situation as the markets continue to digest Friday’s US economic data. We are also only weeks away from the US elections, with the results way too close to call.

Data-wise, we have the RBNZ interest rate decision—expected to cut rates—and CPI and PPI data from the US.

Market Commentary: This communication is for informational purposes only. It is not intended as an offer or solicitation to purchase or sell any financial instrument. 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.

Author

Posted on

Categories

No comment yet, add your voice below!


Add a Comment

Your email address will not be published. Required fields are marked *

×