The past week was quiet for currencies, and in the absence of key economic data, markets continued their recent trends. Equities marched further – mainly driven by more shorts being squeezed – and bond yields tried to bounce higher.

The US dollar generally moved sideways against most major currencies, consolidating recent gains. The DXY index closed above the 104 level, and with interest rate cuts priced in by the Fed from 2024, this gives the greenback strength.

Moderate EZ economic data is still hampering the euro, and as a result, the euro is struggling to find decent shape.

The UK services PMI beat expectations, but this did not move the Pound in another very quiet week.

Commodity currencies accounted for many of last week’s losses, mainly due to their correlation with risk. As equities rose, so did these currencies – the AUD and CAD posted marginal gains, while the NZD and NOK rose more than 1% against the dollar. Elsewhere in FX, JPY fell 0.6%, and CHF fell 0.9%.

Oil continues to be a monster of volatility. This was the third week with moves above 5%, in which intraday traders and scalpers lost out. Last week, WTI rose 5.8% and closed at $76.54.

Precious metals had another sideways week, but rising yields keep them under pressure. Last week, gold and silver fell about 0.5% and closed at $2,024 and $22.60, respectively.

Equities kept their recent bullish trend intact, with US indices showing outperformance. The pattern has been relatively simple, with short sellers constantly being squeezed. The path of least resistance remains upward for now, even if valuations are very stretched. Last week, the S&P500 index closed up 1.4% at 5025, reaching a new ATH, and the DAX remained flat at 16926 points.

Bonds sold off last week and made new lows – but they remain above support. The 10-year UST yield closed down 16bps at 4.18%, close to the key resistance of 4.20%. The 10y Bund fell 1.2% and closed at 133.441.

Finally, cryptocurrencies had a very strong week, again outperforming equities. At the time of writing, Bitcoin rose more than 10% to $48,000 and Ethereum 8% to $2,500.

The week ahead:

The coming week comes with the all-important release of US CPI data, which could cause fireworks again! The Federal Reserve is keeping a close eye on inflation, and if the figure disappoints downwards, more interest rate cuts will certainly be priced in for 2024. In terms of data, we will also get inflation figures from Switzerland and the UK and GDP prints from the eurozone, Japan and the UK.

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