Last week, we had more disappointing US economic data, with Nonfarm Payrolls coming in well below expectations. In the past years, it’s been the case that “bad data is good for risk,” as this inevitably meant looser monetary policy by central banks. But when is bad data bad for risk? Are we getting into a US recession—or are we already in one?

The US Dollaredged lower throughout the week, and the yield curve was uninverted for the first time in a long time; this is usually a sign that a recession is imminent. Last week, the DXY index closed 0.5% lower at 101.188.

The Pound is still trading well. Cable closed flat and trades above 1.31, while the EURGBP remains below the 0.85 resistance level.

The Euro moved broadly sideways, as Eurozone economic data is still mixed – EZ GDP was 0.1% worse than expected, but PMIs were marginally better.

Commodity currencies usually trade in line with risk assets; last week was no exception. The CAD fell 0.6% (it’s worth noting that the BoC cut 25bps as expected), and the NOK, AUD and NZD all dropped around 1%. Elsewhere in FX, it was a very mixed performance, with the CHF gaining 0.8% and the JPY launching 2.7% higher against the Dollar.

Oil had a terrible performance, continuing where it had left off the previous week. The WTI crashed 7.5% lower to close at $68.08 and is now getting perilously close to massive support at around $62-$63.

Precious metals were under pressure as equities sold off, but it was a mixed performance. Gold still reigns supreme as the ultimate store of value, exhibiting remarkable stability when other asset classes struggle. Last week, gold closed almost unchanged at around $2,500, but silver fell over 3% and closed at $27.93.

Bonds forgot about the previous week’s sell-off and returned to full-on bull mode. We are now pricing a good chance of a 50bp cut by the Fed this month, but will that materialise? Last week, the 10y UST yield fell 20bps to 3.71%, and the 10y Bund rallied 0.4% to close at 134.137.

Equities gave up the fight last week as US employment data disappointed in a big way. However, technically, there still isn’t enough evidence that we are entering a bear phase, so shorts should be careful. Last week, the S&P500 index fell 4.5% to 5390 points, and the DAX dropped over 3% to close at 18302.

Finally, crypto-currencies underperformed once again as risk assets were sold. Bitcoin advocates assert it’s a store of value, but performances like these cast doubt on that claim. At the time of writing, Bitcoin was 6.5% lower at $54,400, and Ethereum was down 7.5% at $2,290.

The Week Ahead:

We are getting closer to the September FOMC meeting, and all eyes are on US data and the Dollar. We have US CPI next week, but inflation no longer seems to be in focus. The Fed’s primary interest is surely on unemployment now, and any further deterioration should cement a 50bp cut. We also get inflation readings from Mexico, Germany and Norway, as well as the ECB interest rate decision.

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.