The rate cuts have begun! The Bank of Canada and the European Central Bank cut 25bps, and others will likely follow. Will this be a brief cutting cycle, or will it go deep?

US Nonfarm Payrolls reported a large headline number, but the devil is always in the details. 272,000 jobs were added, but the number of full-time jobs collapsed vs. jumped. The quality of employment in the US is deteriorating rapidly, and the markets don’t seem to have realised this yet.

The US Dollar was on the back foot all week, but it was saved on Friday after the strong headline NFP report. Even though it only managed to post a marginally positive week, the DXY index rose 0.3% to close at 104.934.

The Pound and Euro had another broadly sideways week without any significant surprises. The ECB cut rates and left the door open for subsequent moves without pre-committing to anything.

Commodity currencies (and commodities) were the week’s big movers and the only asset to move powerfully after the NFPs. As is usually the case, any positive US data sends commodities into dive, which often turns out to be a false move. Last week, the AUD, NZD and CAD all fell around 1%, and the NOK dropped 2% against the Dollar. Elsewhere in FX, the JPY and CHF posted small gains.

Oil continued its recent trend lower, reflecting a general deterioration of the global economy. Last week, WTI fell by 2.3%, closing at $75.35.

Precious metals, once again, were not for the faint-hearted! The week had been constructive until Friday morning when news hit the wires about China’s gold stockpiles being flat in May. Is this the end of their gold buying? This sharply lowered gold and silver, prompting algos and technical traders to attempt a forced stop hunt lower. The strong NFP print pushed metals even lower as weak longs capitulated. Ultimately, Gold closed the week 1.4% lower at $2,294 and Silver down 4% at $29.18. However, shorts should be careful as all the fundamentals point to much higher metal prices.

Bonds rallied hard until NFP Friday, following which we saw strong selling in US treasuries. Last week, the 10-year UST yield fell 7bps to 4.43%, and the 10-year Bund rallied 0.7% to close at 130.188.

Equities live in their little world, oblivious to economic data and global economic developments. They only know how to do one thing, and that’s to rally! The path of least resistance remains to the upside for now, but we should eventually see a top as we head to the US elections later this year. Last week, the S&P500 index rose 1% to 5343, and the DAX gained 0.3% to close at 18557 points.

Finally, crypto-currencies had a second week of consolidation, but interestingly, they didn’t follow stocks higher than their recent correlation would have suggested. At the time of writing, Bitcoin is 2% higher at $69,300, and Ethereum is nearly 3% lower at $3,690.

The Week Ahead:

The week after Nonfarm Payrolls is always very interesting. Typically, the markets continue where they left off on Friday. Will this be the case again, and will we see equities make new ATHs?

There could be significant obstacles, as we have the FOMC rate decision and US CPI this week, where we will see just how sticky inflation is in the United States. We also get inflation data from Norway, Japan, Switzerland, and Germany, as well as the interest rate decision from the Bank of Japan.

Market Commentary: This communication is for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. 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.