The Federal Reserve surprised markets last week by delivering a 50bp cut. Chair Powell tried to calm expectations of a deeper cutting cycle by implying that they are simply bringing forward future rate cuts, but the markets were unconvinced. Markets were buoyant overall following the rate cut, with cryptos and precious metals outperforming.

The US dollar fell after the 50bp cut, but overall, it managed to contain the losses, and trades are still above critical support. Last week, the DXY index fell 0.4% and closed at 100.738.

Sterling performed well as the Bank of England kept rates unchanged, and the split was more hawkish than expected. Sterling rallied 1.5% against the dollar and 0.7% against the euro, which is currently in an uptrend.

The Euro had another relatively quiet week, as Eurozone inflation aligned with expectations and other economic data was mixed.

Commodity currencies did well, risk-on prevailed, and commodities performed well. The CAD was only marginally higher last week; the AUD and NZD rallied roughly 1.5%, and the NOK gained 1.7% against the Dollar. Elsewhere in FX, the CHF was flat, and the JPY lost over 2%.

Oil had a second positive week, following the rest of the commodity complex higher after the Fed 50bp cut. Last week, the WTI gained 2.9%, closing at $71.19.

Precious metals had a second week in a row and were naturally driven higher following the FOMC decision. Gold closed the week 1.7% higher, making new ATHs $2,622, while Silver rallied 1.5% to close at $31.17.

Bonds didn’t make any progress despite the larger-than-expected Fed cut. Last week, the 10-year UST yield rose 8bps to 3.74%, and the 10-yearBund fell 0.2% to close at 134.186.

Equities naturally greeted the 50bp Fed cut with optimism and will likely continue higher in the short term. Last week, the S&P500 index rallied to new ATHs, closing at 5709 points. The DAX was only marginally higher at 18720 points.

Finally, crypto-currencies reverted to their risk proxy role, rallying in line with equities. At the time of writing, Bitcoin and Ethereum are around 5% higher, at $63,000 and $2,550, respectively.

The Week Ahead:

It should be another hectic week! The markets are digesting the Fed’s 50bp cut, and the risk rally could likely continue, but many economic data releases could complicate things. We have Manufacturing and services PMIs, interest rate decisions from the RBA and SNB, and US GDP and core PCE readings.

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