Last week was another risk-on week, as markets anticipate the upcoming FOMC interest rate cut. The presidential debate also fueled speculation, with neither candidate mentioning the deficit, arguably the biggest problem facing the US economy. Equities, precious metals and cryptos rallied hard, and shorts continued to get squeezed.

The US Dollarhad a tranquil week as CPI and most other US economic data aligned with expectations. The DXY index was broadly flat, just above the 101 level, but we are close to support. Next week’s FOMC decision should trigger a break below or a bounce towards 103.

The Pound managed to stay flat last week, even though GDP and Earnings data were disappointing. The Euro was also very quiet last week, as the ECB put 25bps in line with expectations.

Commodity currencies should have performed well given the general risk-on move, but they didn’t. It was a lacklustre performance, with the NZD, CAD, and NOK all moving slightly lower against the USD, and the AUD was the only winner with a 0.5% rally. Elsewhere in FX, the CHF fell 0.7%, and the JPY rallied 1%.

Oil managed to post a positive week after the previous week’s disaster but remains under pressure. Last week, the WTI rallied 1.7% to close at $69.21.

Precious metals had a great week, as markets are starting to realise that the deficits and ballooning US debt are not going to be in Trump’s or Harris’s focus. Last week, Gold gained over 3.2% and hit new ATHs, closing at $2,578. Silver finally outperformed Gold with a 10% rally, closing at $30.72.

Bonds rallied for the second week in a row, and bulls are still in control. Last week, the 10-year UST yield fell 5bps to 3.66%, and the 10-yearBund rallied 0.5% to close at 134.756.

Equities reversed almost all of the previous week’s losses and are now looking at the FOMC rate decision for further direction. The S&P500 index rallied 4.3% at 5623 points, and the DAX gained 2.2% to close at 18699.

Finally, crypto-currencies breathed a sigh of relief as the risk-on rally carried them higher. They may have been underperforming recently, but last week was very positive. At the time of writing, Bitcoin is up over 10% at $60,200, and Ethereum is 5.7% higher at $2,420.

The Week Ahead:

It’s going to be all about the FOMC rate decision next week! It’s most likely that a 25bp cut will be negative for markets, which expect the Fed to embark on a steeper cutting cycle in support of the ailing US economy. On the other hand, a 50bp cut will likely bring more strength to markets, and it will be greeted with more enthusiasm. Data-wise, we have inflation releases from Canada, the UK and the Eurozone. We also have interest rate decisions from the BoE, BoJ and Norges Banks.

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