Another week has gone by with a constant back-and-forth flow of headlines concerning the ongoing conflict in Iran. The situation appears to be delicately poised, with both sides striving to maximise their objectives while avoiding de-escalation.
The US Dollar found support from positive US economic data, and as risk assets remained largely stable, the DXY index increased by 0.3%, closing at 98.51.
The Euro and Sterling remained relatively quiet as economic data presented a mixed picture, with markets anticipating the central bank rate decisions scheduled for next week.
Commodity currencies experienced a quiet week even as oil prices surged. The AUD, NZD, and CAD showed minimal movement, while the NOK gained 0.6% against the Dollar. In other FX news, both the CHF and JPY declined by about 0.5%.
Crude oil rebounded from the previous week’s losses, posting a strong performance. As long as the situation in Iran remains unresolved, oil is expected to stay in demand; last week, WTI surged 13% to close at $94.87.
Precious metals finally showed signs of weakness after three weeks of gains, although no significant cause was identified. Gold decreased by 2.5% to $4,710, and Silver dropped over 6% to close at $75.69.
Bonds reversed the previous week’s gains, selling off as oil prices climbed. Last week, the 10-year UST yield increased by 6 basis points to close at 4.31%, and the 10-year Bund fell by 0.3% to 125.696.
Equities continue to be the only asset class seemingly unaffected by the Iran conflict. Stocks, particularly in the US, are looking beyond the current situation, which presents a risky outlook. Some US indices reached new all-time highs, with the S&P 500 rising 0.5% to close at 7169. In contrast, the DAX in Europe fell by 2.3% to close at 24129.
Finally, cryptocurrencies are still trying to establish their correlation with risk assets. At the time of writing, Bitcoin has risen by 1% to $77,500, while Ethereum has decreased by 2% to $2,320.
The Week Ahead:
The upcoming week is packed with economic data releases and central bank activity! Rate decisions are expected from the Federal Reserve, the ECB, the Bank of England, the Bank of Japan, and the Bank of Canada. While no changes are anticipated, surprises could arise from the press conferences. However, the markets are likely to remain more focused on developments in Iran, which may overshadow central bank announcements and other economic data.
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