It was a week dominated by central banks, and while the only rate surprise was the Norges Bank hike, the Federal Reserve provided most of the market action. Fed members are now clearly discussing rate cuts, bringing optimism to markets.

The US Dollar reversed all of last week’s gains as the dovish Fed applied tremendous downward pressure. The DXY index fell 1.3% to close at 102.593 points, making new lows and aiming for the July lows around the 100 mark.

Yet more weak Eurozone economic data hit the Euro, and even the mildly hawkish ECB didn’t manage to push the single currency higher. EURUSD closed just below the 1.09 level, while EURGBP is still hovering near 0.86.

The Pound was negatively affected again by weak UK data, namely average hourly earnings and GDP.

Commodity currencies are on a rollercoaster ride as the USD and yields remain volatile. Last week, it was their turn to shine with an excellent performance. The AUD, NZD and CAD gained between 1.5% and 2%, while the NOK (helped by the surprise Norges Bank hike) rocketed 4% higher against the USD. Elsewhere in FX, the CHF rallied 1%, and the JPY gained 2% – next week’s BoJ meeting will be crucial for the Yen.

Oil had a week of consolidation, but the trend remains lower. Last week, the WTI gained 0.7% to close at $71.74.

Precious metals are still in focus, exhibiting wild intraday and intraweek moves. With yields and the Dollar falling, metals naturally performed very well. Gold rallied 0.7% to $2,019, and Silver gained 3.7% to close at $23.84. The main level remains Gold’s ATHs at around $2,150, which should get tested again.

Equities kept increasing, and as we’ve repeatedly said, the pain trade is still at higher levels. The S&P500 index rallied 2.6% last week, closing at 4724 points. The DAX was broadly flat at 16,751 points and remains very close to its ATHs.

Bonds are still trading very bullish, and the dovish Fed helped them climb much higher. Last week, the 10y UST yield collapsed 31bps to 3.92%, and the 10y Bund rallied 1.8% to close at 137.188 points.

Finally, crypto-currencies have rediscovered their old-style volatility. The general risk-on sentiment didn’t correlate with cryptos last week, as they struggled to find support. At the time of writing, Bitcoin and Ethereum are around 5% lower, at $41,800 and $2,215, respectively.

The Week Ahead:

We are now done with most central banks for this year, but we still have the BoJ next week! The Yen can be a real market-mover, and even though BoJ officials have usually been dovish, we should always prepare for an unexpected hawkish surprise.

Data-wise, we have inflation data from the Eurozone, Canada, the UK, Japan and Mexico, and we also get the Fed’s favourite inflation measure: Core PCE.

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