Throughout the week, markets exhibited cautious optimism concerning the conflict in Iran, reflected in the gradual rise of both equities and bonds. On Saturday, US President Trump announced that a deal is nearly finalised, with the remaining details to be finalised over the weekend.
The US Dollar maintained its recent gains despite mixed economic data. Last week, the DXY index remained largely stable at 99.31, though a potential Iran deal could put downward pressure on it in the coming days.
The Euro edged slightly lower as the Eurozone CPI met expectations, but disappointing PMI figures weighed on it.
Sterling had a strong week, recovering all the previous week’s losses, despite a decline in UK CPI from 3.0% to 2.8%. The EURGBP dropped 1% to close at 0.8639, positioning it in the middle of its broad 10-year range.
Commodity currencies experienced a mixed week with little clear direction. Last week, the AUD and CAD edged lower, while the NZD and NOK showed slight increases against the Dollar. Elsewhere in the forex market, the CHF and JPY remained relatively stable.
Crude oil experienced further intraday and intraweek volatility as the conflict in Iran persisted. Prices fell throughout the week in anticipation of a deal and are likely to continue declining if an official agreement is announced. Last week, WTI decreased by 4% to close at $97.
Precious metals had a subdued week but remain overall volatile since their January crash. Last week, Gold and Silver dropped around 0.5%, closing at $4,510 and $75.51, respectively.
Bonds rallied in anticipation of a deal in Iran. Central banks have adopted a more hawkish stance as oil prices rise and inflation is expected to follow, posing a challenge for bonds. However, with a deal now on the horizon, yields are likely to fall further. Last week, the 10-year UST yield decreased by 3 basis points to 4.56%, and the 10-year Bund rallied by 1.2% to close at 125.366.
Equities remain robust, and there is no technical indication that a market top is imminent. With the Iran deal now appearing likely, a substantial upward push is expected. Last week, the S&P 500 index gained 1% to close at 7472, and the DAX surged nearly 4% to 24888 points.
Cryptocurrencies continue to underperform among risk assets, with Bitcoin down 2% to $76,500 and Ethereum down 4% to $2,110 at the time of writing.
Looking Ahead:
The upcoming week is packed with data releases, including inflation reports from Japan, Australia, and the US, as well as the RBNZ interest rate decision. However, the spotlight will remain on the conflict in Iran, and the deal announced by Donald Trump is imminent.
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