Last week, we saw more US economic data beat expectations – after last Friday’s NFP beat, the CPI came in 0.2% higher than expected, at 3.4% YoY. However, this strength failed to halt the trend of recent weeks: lower yields and higher equity indices.

The US dollar moved sideways most of the week and failed to show strength because of strong US economic data. The DXY index ended the week flat at 102,439.

The euro and pound also had a quiet week and moved only marginally against the other majors.

Commodity currencies usually perform when interest rates fall, and risks rise, but they failed to do so last week. The AUD, NZD, and CAD traded within a relatively narrow range and showed little direction. The same goes for CHF and JPY in a quiet week for FX.

Oil maintained as in recent weeks – strong intra-week volatility but no technical breakout. Last week, WTI fell 1.6% and closed at $72.74.

Precious metals moved sideways last week, although falling yields should have boosted them. Gold closed 0.2% higher at $2,049, and silver remained flat at $23.19.

Equities reversed last week’s moves, and, as we said earlier, the trend is still bullish. Last week, the S&P500 index rose 1.8% to 4778 points, and the DAX rose 0.7% to 16704 points.

Bonds recovered losses from the previous week, confirming our view that this was a short-term correction. The path of least resistance is towards higher prices and lower yields. Last week, the 10-y UST yield fell 10bps to 3.94%, and the 10-y Bund rose 0.2% to 135.703 points.

Finally, cryptocurrencies eagerly awaited the approval of the Bitcoin ETF, which was finally finalised last week. Bitcoin had already priced in the news and sold off after the event. Ethereum performed much better, however, and rumours of a potential ETH ETF are already circulating. At the time of writing, Bitcoin was 1.8% lower at $43,200, and Ethereum was more than 13% higher at $2,550.

The week ahead:

We wait to see if the current trend will continue in the coming week (i.e. lower yields and higher risk assets), as we are just over two weeks away from the next Fed rate decision.

We have more inflation data from Canada, the UK, the eurozone and US retail sales.

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