Risk off continued last week, mainly fuelled by deteriorating US economic data—with employment in particular showing weakness. The Yen carry trade is being unwound (with the BoJ hiking rates again), putting further pressure on equities and other risk assets.

The US Dollar had yet another negative week, as markets now price a good chance of a Federal Reserve 50bp rate cut in September. The DXY index fell 1.1% to close at 103.221 last week as it moved swiftly towards the 101-101.50 support area.

The Pound had a negative week as the Bank of England followed the ECB in cutting rates. The BoE’s dovishness puts a lid on any Pound strength, with GBPUSD closing at the 1.28 level and EURGBP moving back up to resistance in the low 0.85s.

The Euro performed well last week, as the Eurozone GDP and CPI were surprised by the upside. The EURUSD rallied 0.5% to close above 1.09 again, and the single currency rallied against many other majors.

Commodity currencies had an encouraging week despite the general risk sell-off. The AUD and CAD fell around 0.5%, while the NZD and NOK rallied 1.2% and 0.7% respectively. Elsewhere in FX, the CHF rallied nearly 3%, and the JPY was the week’s superstar currency with a 4.7% gain against the greenback.

Oil and risk assets were under pressure all week, registering a fourth negative week. The WTI fell 3%, closing at $74.11, and is now heading towards massive support at the $62-$66 zone.

Precious metals usually perform poorly during risk-off periods and general panic, but they showed great resilience last week. Gold and Silver rallied over 2% to close at $2,442 and $28.56, respectively.

Bonds had a monster week, driven by increased rate cut expectations worldwide. The US treasury market led the way higher, with yields collapsing across the curve in a bull flattener. Last week, the 10-year UST yield fell 40bps to close right on major support at 3.79%, while the 10-year Bund rallied 1.9% to close at 135.198 points.

Equities continued their collapse lower and are now near technical support. A bounce from here is probable, and we must remember that monetary easing usually supports stocks. Last week, the S&P500 index fell 2.4% to close at 5335 points, and the DAX crashed 4.1% lower at 17661 points.

Finally, crypto-currencies sold off hard in line with equities, despite Donald Trump’s vocal support for cryptos should he become president again. At the time of writing, Bitcoin was down 8% at $62,000, and Ethereum was down 7% at $3,000.

The Week Ahead:

Next week, equities and risk assets will dominate as the market struggles to find support. Can we see a bounce from here following three negative weeks in a row? Data-wise, we have interest rate decisions from the RBA and Banxico, and we also have Services PMIs from across the globe.

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.