The Trump trade is alive and well, and we continued the moves of recent weeks. The US Dollar wrecking ball remained the main feature, pushing risk assets higher. PMIs disappointed in the UK and the Eurozone, with the single currency plunging further as the ECB is expected to deliver more rate cuts.

The US Dollaris still king of the major currencies, and its strong run continues for yet another week. Last week, the DXY index rallied 0.8% to close at 107.491.

The Euro remains vulnerable, hampered by continued disappointing Eurozone economic data. Last week, the EURUSD traded below 1.04 for the first time since 2022, ultimately closing 1.2% lower at 1.0415.

Sterling moved lower for the second week in a row. UK PMIs came in soft, while CPI was 0.1% higher than expected at 2.3% YoY, which is not what the BoE wants to see. Last week, the GBPUSD fell 0.7% to close at 1.2523, but it now lies at important trendline support.

Commodity currencies had a mixed week, as higher oil prices cushioned the fall caused by the strong Dollar. Last week the NZD and CAD were around 0.5% lower, the NOK was unchanged, while the AUD was up around 0.5%. Elsewhere in FX, the JPYand CHFwere up around 0.5% against the greenback.

Oil bounced back strongly from the support zone we mentioned in last week’s newsletter. It still remains in a range, exhibiting elevated weekly volatility. Last week, WTI rallied over 6% to close at $71.12.

Precious metals also regained all of the previous week’s losses, and some pundits quickly declared that their post-election correction lower is over. We think we shouldn’t be hasty; their medium-term direction should be a lot higher, but the short-term damage is likely not over yet. Last week, Gold rallied 6% to $2,716, and Silver gained 3.6% to close at $31.34.

Bonds had a quiet week for a change, as markets realised we are now pricing very little in terms of further monetary easing by the world’s major central banks. Last week, the 10-year UST yield was 3bp lower at 4.41%, and the 10-year Bund rallied 0.6% to close at 133.037.

Equities confirmed what we said last week: there is still no bearish technical evidence for a sustained move lower. Most major indices bounced back after the previous week’s negative move, showing more resilience. Last week, the S&P500 index rallied 1.6% to close at 5974 points, and the DAX rose 0.6% to 19322.

Finally, crypto-currencies are unstoppable, as crypto fans consider this administration the best thing ever happening to the sector. But what can we expect shortly? This market has become too frothy now, and the risk for a proper correction lower is looming large. Bulls should be cautious! At the time of writing, Bitcoin and Ethereum are up around 8% at $98,500 and $3,400 respectively.

The Week Ahead:

There has been much jubilation and anticipation following the Trump win, and we fear we are now getting very close to the point where the markets have gotten way ahead. After all, if Trump does reduce the deficit and cut government spending as planned, this would be very negative for employment and risk assets in the short term – such policies should be deflationary, in theory. For now, markets are buoyant and complacent, and this is always a dangerous environment.

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.