The markets were disappointed by stalled progress in Iran last week, leading to higher yields and a decline in risk assets. Additionally, the Trump-Xi meeting resulted in positive remarks from both parties, but no definitive actions have been taken yet.
The US Dollar demonstrated its typical strength during risk-off events, bolstered by US CPI and PPI figures surpassing expectations. Consequently, the DXY index rose by 1.5% over the week, closing at 99.269.
While the Euro declined against the Dollar, it performed well relative to most other major currencies. The Pound weakened across the board, partly due to the instability within Keir Starmer’s Labour Party and the overall fragile political climate.
Commodity currencies, aligning with risk trends, reversed the gains made the previous week. Over the past week, the CAD dropped 0.5%, the AUD fell by over 1%, and the NZD was the worst performer, down 2%. In other foreign exchange news, both the CHF and JPY fell approximately 1% against the US Dollar.
Crude oil prices surged amid frustration in markets over Iran’s lack of progress. Last week, the WTI price jumped nearly 7%, ending at $101.15.
The precious metals market continues to exhibit high volatility, challenging both bullish and bearish investors. Last week saw a significant decline in metals, as they fell sharply alongside rising yields and the Dollar, erasing previous gains. Gold closed over 3% lower at $4,540, while Silver dropped over 5% to $75.99.
Bond markets reacted nervously to the surge in oil prices, prompting expectations of more rate hikes by major central banks. The 10-year US Treasury yield increased by 23 basis points, reaching 4.59%, whereas the 10-year Bund fell 1.4%, closing at 123.913.
Equities appear to be the most optimistic asset class, seemingly unperturbed by developments in other markets. The S&P500 index remained flat, closing at 7400 points, and would have ended the week positively if not for a late drop on Friday. The DAX also declined last week, losing 1.6% to close at 23950 points.
Cryptocurrencies experienced a challenging week, significantly impacted by rising yields and a strengthening Dollar. As of now, Bitcoin is down 3% at $78,200, while Ethereum has dropped 5% to $2,200.
Looking ahead to the coming week, it’s packed with data releases, including CPI figures from Japan, the Eurozone, the UK, and Canada. GDP data from Japan and Switzerland, along with PMI figures, are also anticipated. However, yields will remain the primary market driver, with attention focused on the ongoing situation in Iran and any new developments.
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