Last week was a bit lighter than other recent weeks in terms of economic data, and markets took a small breather. The focus remains on yields and the dollar, and we did not make much progress on those fronts.

The US dollar still does not seem to be gaining traction and is falling while US economic data remain mixed and leading indicators continue to give warning signals. Last week, the DXY index fell 0.4% to 103,415.

The Euro finally got a break on economic data from the EU – the manufacturing and services PMI beat expectations – but the single currency can still not find a good bid.

Sterling performed well as the UK Services PMI surprised with an expansionary print. GBPUSD closed the week more than 1% higher, just outside the 1.26 level, and EURGBP fell 0.8% and closed at 0.8672.

Commodity currencies had a second strong week, even as oil fell and yields rebounded. The CAD and NOK rose just over 0.5%, the AUD gained 1%, and the NZD was the best performer of the day with a 1.5% rise against the dollar. Elsewhere in FX, the JPY posted marginal gains and CHF rose around 0.5%.

Oil continues to underperform as the market’s focus shifts to demand rather than supply. The global economic environment does not look bright, and oil demand will likely decline. Last week, WTI fell 1.2% and closed at $75.13.

Precious metals had a second strong week in a row and showed a lot of promise and resilience. We have not seen a real technical breakout yet, but we are getting closer! Last week, gold rose 1.1% to close at $2002, and it is now just over $70 away from its all-time highs. Silver rose 2.6% to $24.33, slowly approaching its ultimate breakout level at $26.

Equities clearly show us that the pain trade is for higher levels. They seem unable to sell long-term and positioning is still short. We should not forget that seasonality is strong for December (the infamous “Santa” rally), so traders should be extra cautious when going short. Last week, the S&P500 index rose 1% and closed at 4558, and the DAX rose 0.7% and closed at 16028 points.

Bonds fell from resistance levels and are likely to make a short move lower before moving higher again towards the end of the year. US 10-year yields bounced on 4.36% support and closed the week higher at 4.47%. The 10-year Bund fell 0.4% last week and closed at 130.448 points.

Finally, cryptocurrencies again performed very well despite the headlines about Binance. The price action remains bullish and shows much resilience! At the time of writing, Bitcoin stands 3.6% higher at $37,800 and Ethereum 7.5% higher at $2,085.

The week ahead:

The coming week should be lively, as we should see how much higher this limit in yields will go before moving lower again. In terms of data, we have the US Core PCE (the Fed’s favourite inflation measure) and the second revision of US GDP, which had shown an initial 4.9% QoQ. We will also get more CPI and PMI data from around the world.

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