The past week was dominated by inflation data, and the US numbers surprised to the upside. US CPI YoY dropped to 3.1% and continued its recent descent, but it fell by less than the markets expected. However, the rest of the major economic data was mixed, and as a result, the markets didn’t show any significant trend.

The US Dollar moved sideways for the second week, making marginal gains. The market is now pricing less than four 25bp cuts in 2024, which is very close to what is projected by the Fed’s dot plot. Last week, the DXY index rose 0.2% to close at 104.275.

The Euro and the Pound both showed minimal movement. UK CPI and GDP disappointed to the downside, but Retail Sales posted a big beat; that data was broadly balanced, so there was little movement for the GBP.

Commodity currencies, like most other major currencies, were also very quiet. The only currencies showing real movement were the CHF and JPY, with 0.7% and 0.6% losses, respectively.

Oil showed yet more intraweek volatility, closing the week strongly. WTI ended the week 2.1% higher at $78.16.

Precious metals were once more volatile, with gold breaking below the psychological $2,000 barrier but bouncing straight back above. Ultimately, Gold closed 0.5% lower at $2,013, and Silver rallied 3.6% to close at $23.41.

Equities are still trading very well, failing to show any weakness yet. The S&P500 index consolidated its recent gains, retreating marginally to close at the 5000 level. The DAX outperformed with a 1.1% gain, closing the week at 17117 points.

Bonds fell for the second week as they tried to gain downward momentum. The 10y UST yield rose 10bps to 4.28% and is now heading towards critical resistance near 4.35%. The 10y Bund fell 0.3% to close at 133.016.

Finally, crypto-currencies had another very strong week – at the time of writing, Bitcoin was up nearly 8% at $51,700, and Ethereum was up over 11% at $2,780.

The Week Ahead:

It will be all about central bank rate expectations in the next few days as we determine when the rate cuts will start and how deep they will go. Data-wise, the focus will be on Manufacturing and Services PMIs from the US, the UK, the Eurozone, Japan and Australia.

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