Last week, we predicted the most likely scenario for risk to remain bid. As it turned out, markets didn’t rally, but every dip was bought convincingly. Stronger-than-expected US data are pushing rate cuts further out in 2024 and beyond, but even so, the Dollar is struggling to find any strength, and equity and bond bears keep getting frustrated by continued price support.

The US Dollar, a key player in the global market, managed to halt its 2-week losing streak. However, its strength was insignificant, with the DXY index increasing by a mere 0.2% to close at 104.747.

UK inflation fell less than expected but still printed at 2.3%, close to the BoE’s 2% target. Eurozone data was mixed, resulting in the Pound and the Euro trading within relatively tight ranges last week.

Commodity currencies retreated slightly following a couple of excellent weeks. The NZD fell 0.2%, the CAD fell 0.4%, and the AUD retreated 1%. The week’s best performer was the NOK, with a 0.9% gain. Elsewhere in FX, the CHF and JPY all fell between 0.5% and 1% against the Dollar.

Oil gave back all of the previous week’s gains, as it remains very volatile and lacks clear direction. Last week, WTI fell 2.2%, closing at $77.75.

Precious metals retreated following a very sharp move higher, which makes much sense price-wise. Markets were very overbought in the short term, and such explosive moves higher almost always retrace lower before resuming their natural directions. Last week, gold and silver fell over 3%, closing at $2,334 and $30.36, respectively.

Bonds sold off slightly due to the positive US data, but they still look constructive. Last week, the 10-year UST yield rose 4bps to 4.46%, and the 10-year Bund fell 0.5% to close just above 130 points.

Equities still failed to move higher, but they still show good momentum. The strong NVDA results helped, and the path of least resistance is still likely to the upside. Last week, the S&P500 index was flat at 5306 points, and the DAX rose 0.6% to close at 18808.

Finally, crypto-currencies continued to show strength, with Ethereum outperforming in a big way as rumours of an ETH ETF continued to grow. At the time of writing, Bitcoin is 3% higher at $69,200, and Ethereum is over 20% higher at $3,800.

The Week Ahead:

The week ahead should be very interesting as we get US GDP and Inflation data. The Federal Reserve is still in focus as markets continue to guess when the rate cuts will start and how deep they will go.

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