Another week came to a close, and it was yet another beat in US employment data. Nonfarm Payrolls came in over 300K – well above expectations – although if we dig into the details, the picture is far from rosy; part-time jobs surged while full-time jobs stagnated. The FX market was relatively quiet, while yields uncharacteristically rose in tandem with precious metals.

The US dollar didn’t post any gains despite the strong economic data. Last week, the DXY index fell marginally to 104.286.

The Euro and the Pound have been trading sideways for almost a month now as data continues to disappoint. Both central banks are looking for rate cuts in 2024.

Commodity currencies moved mostly higher as the Dollar stalled and Oil rallied. The NZD gained 0.6%, the AUD rallied around 1%, but the CAD underperformed with a 0.4% drop. Elsewhere in FX, the CHF was flat, and the JPY fell 0.2%.

Oil rallied for the second week in a row, with fears emanating from global geopolitical risks. Last week, the WTI rallied 4.3% to close at $86.67.

Precious metals had a monster week even as yields rose. It seems that the markets are realising that the US (and global) debt situation is unsustainable, and this is lifting metals. Last week, Gold rose over 4% to close at $2,330, and Silver shot 10% higher at $27.49.

Equities are still trading much better than expected given the strong jobs report and rising yields. Last week, the S&P500 index fell 0.8% to 5210 points, and it remains in a broad uptrend, while the DAX fell 1.7% to close at 18175 points.

Bonds fell as more rate cuts were taken out of 2024. The market is now only 50-50 for a June Fed cut, and the 10y UST yield rose 19bps to close at 4.40%. The 10y Bund also sold off, closing 0.8% lower at 132.168 points.

Finally, crypto-currencies are still under some short-term pressure – at the time of writing, Bitcoin is marginally lower on the week at $69,500, and Ethereum is down 5% at $3,390.

The Week Ahead:

Volatility should remain elevated next week, as we have some major economic data coming up. We get inflation data from the US, Mexico, Japan, Norway and Germany, with the main event being US CPI. We also have interest rate decisions from the Bank of Canada and the ECB.

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