The US Dollar continued its powerful move higher last week, along with yields, but this time, equity markets lagged behind. US CPI (both headline and Core) came in line with expectations, unchanged from the previous month, showing that inflation pressures may have abated, but they are not at the Fed’s target yet.

The US Dollarwas once again the king of currencies, continuing its impressive rally. Markets are now pricing much less easing by the Fed in the coming months, but will this materialise? Powell keeps reminding everyone that the US economy and labour market are doing well, but in reality, things could be much more delicate. Last week, the DXY index rallied 1.6% to close at 106.673.

Mediocre German economic data are still holding back the Euro, and there are few signs that the Eurozone is ready to drive forward in terms of growth and economic activity. Last week, the EURUSD fell 1.7% to 1.0538, reaching levels not seen since late 2023.

Sterling moved lower across the board as the UK economy continued to disappoint, with GDP now only marginally positive.

Commodity currencies quickly forgot about last week’s rally and resumed their fall—making it 6 out of 7 weekly losses; the rallying USD and falling oil price were too strong a driver. Last week, the NOK fell 0.8%, the CAD dropped 1.3%, and the AUD and CAD both fell nearly 2% against the Dollar. Elsewhere in FX, the JPY and CHF fell around 1%.

Oilhad a bad week and is showing continued weakness. We are now within a major support zone that, if broken, could target the $40-$50 range. Last week, the WTI fell 5%, closing at $66.91.

Precious metals remain firmly in corrective mode following Trump’s election win. Sentiment has changed significantly within a couple of weeks, as optimistic calls for $5000 Gold and $50 Silver have been silenced. This healthy corrective move lower will most likely be followed by another thrust higher. Last week, Gold fell 4.5% to $2,563, and Silver dropped 3.4% to close at $30.25.

Bonds moved lower once again as the general “higher inflation for longer” narrative remained dominant. Last week, the 10-year UST yield rose 13bps to close at 4.44%, and the 10-yearBund was broadly flat at 132.272.

Equities finally showed some weakness as yields and the USD rallied – but will this last? There is no bearish technical evidence yet, so the path of least resistance is likely higher still. Last week, the S&P500 index fell 2% to close at 5881, and the DAX was flat at 19211 points.

Finally, crypto-currencies remain in monster bull mode! The markets are optimistic about Trump’s pro-crypto policy, but what exactly are they expecting? A strategic Bitcoin reserve has been frequently mentioned, but cryptos will be vulnerable if this doesn’t materialise. For now, longs are firmly still in control. At the time of writing, Bitcoin is nearly 20% higher at $90,700, and Ethereum is up 4% at $3,150.

The Week Ahead:

The Trump trade momentum remains strong, and next week, our focus will be on equity indices – will they be able to regain their bullish momentum, or will we have a second negative week in a row? We have inflation readings from the Eurozone, Canada, and the UK, as well as broad PMI data.

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.