Another week of mixed US economic data came to a close, and the Federal Reserve probably still has good reason to cut another 25bps—however, after that, the future is more uncertain.

The US Dollar crept slightly higher last week but couldn’t establish a clear trend higher as economic data was mixed. We got weaker-than-expected ADP and PMIs but stronger-than-expected Average Hourly Earnings and Nonfarm Payrolls. Last week, the DXY index rose 0.2% to close at 105.971. 

The Euro was flat against the USD, GBP, and JPY and gained ground against commodity currencies. Eurozone economic data didn’t surprise, and the ECB is expected to cut 25bps in the next meeting. 

Sterling also had a relatively quiet week, with no political developments or economic data surprises.

Commodity currencies lost all of the previous week’s gains and then some. Last week, the NOK and CAD fell 1% against the Dollar, while the AUD and NZD lost more than 1.5%. Elsewhere in FX, the JPY and CHF were broadly flat. 

Crude Oil still looks weak, as it lies within a major support zone. Last week, the WTI fell 1.5%, closing at $67.11. 

Precious metals are trying to build a base and find their footing, but they need convincing. Recent crypto strength is putting downward pressure on gold and silver as speculative funds switch out of metals and into cryptos. Last week, Gold shed 0.6% to close at $2,633, and Silver rallied 1.1% to close just shy of the $31 level.

Bonds continued their recent rally, and given that the market remains short, the path of least resistance is likely still to the upside. Last week, the 10-year UST yield fell 3bps to 4.15%, and the 10-year Bund rallied 1% to close at 136.227. 

Equities remain bullish, and as we repeated last week, the path of least resistance is still to the upside. Last week, the S&P500 index gained 0.8% to close at 6087, and the DAX rallied almost 4% to 20384 points. 

Finally, crypto-currencies had yet another massive week, as retail seems convinced we are heading for much higher levels. The major $100k level was broken in Bitcoin, and the risk now is that longs are a massively crowded trade. Momentum may still be relatively strong, but we may have seen the top for now. At the time of writing, Bitcoin was up over 2% at $99,500, and Ethereum was nearly 8% higher at $3,990.

The Week Ahead:

There is still a dominant euphoria in markets, equities and cryptos. A “buy the dip” strategy has worked well over the past couple of years and should continue to work in the very short term. However, we are at very lofty valuations, and a correction will eventually happen; when it does, many traders will scram for the exit simultaneously. Data-wise, we have important inflation readings from the US, Japan, Mexico and Norway. We also have interest rate decisions from Australia, Canada, Switzerland and the Eurozone.

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.