It was another eventful week, both inside and outside the markets. Geopolitical tensions are rising as Israel begins ground operations in Gaza, with a major fear being an escalation outside that region. Markets reacted cautiously, while bonds and gold found good bids and equities retreated.

The US dollar index retook last week’s losses as the greenback made a flight-to-safety trade. The DXY index remains in an uptrend for now, rallying 0.4% last week and closing at 106.581.

The euro is still at the mercy of poor economic data from the eurozone, with PMIs disappointing and Christine Lagarde sounding cautious about the economy again.

Sterling had a relatively quiet week with mixed economic data. The main event for the pound next week is the Bank of England’s interest rate decision, and although UK inflation remains on the high side, we cannot help but expect another dovish BoE.

Commodity currencies lost some more ground as risk-off dominated the week. The AUD and NZD were actually relatively stable, but the CAD and NOK both lost more than 1% against the dollar. Elsewhere in FX, USDJPY reached the important 150 level but then retreated to end the week flat and CHF fell 1.1%.

Oil was tossed back and forth between the Israel-Gaza conflict and risk-off; the latter eventually prevailed and WTI closed the week 3.6% lower at $85.11.

Precious metals had a mixed week. Gold was driven by fear and flight to safety, rising more than 1% to $2,006. Silver, on the other hand, was driven by fear and flight to safety. Silver, on the other hand, was driven more by risk and fell 1.1% to $23.10.

Equities traded lower and some key technical levels were finally broken. The 4200 S&P500 support was broken and the index closed the week 2.4% lower at 4112 points. The DAX also performed poorly, falling 1.1% to 14616 points.

Bonds started the week with selling pressure, but developments in Gaza brought a strong bid to close the week. The 10-year UST yield reached 5% mid-week but ended at 4.85%. The 10y Bund rose 0.7% to close at 128.906 points.

Finally, cryptocurrencies had an excellent week as security trades trumped their correlation with risk. The possible launch of a crypto-ETF also helped the higher move. At the time of writing, Bitcoin stands 15% higher at $34,100 and Ethereum 10% higher at $1,789.

The week ahead:

We should brace ourselves for another super volatile week as there are many unknown factors that could shake the markets. Israel’s Gaza operations continue and geopolitical risk remains high. On the data front, we have interest rate decisions from the BoJ, Norges Bank, the BoE and, of course, the FOMC. We also have GDP and CPI data from the eurozone and other areas, and we close the week with the usual NFP mayhem.

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