The conclusion of the Iran conflict remains uncertain, yet equity markets appear to be anticipating an end. Although there are more positive headlines related to Iran, a final agreement has yet to be reached. Until then, markets stay hopeful but volatile.
The US Dollar slightly declined despite the favourable NFP data. The DXY index decreased by 0.4% last week, closing at 97.842, and continues to consolidate in a sideways pattern.
The Euro experienced an uneventful week with no major economic data or developments.
The Pound saw a slight positive change as the UK local elections proceeded, revealing the ruling Labour Party losing ground to its competitors.
Commodity currencies had a strong week amid risk rallies. The CAD was an outlier, dropping 0.6% due to weak Canadian employment data. The AUD rose 0.6% following a 25bps hike by the RBA, the NOK increased by 0.8%, and the NZD surged 1.2% against the Dollar. In other FX movements, both the JPY and CHF grew by approximately 0.5%, while the MXN climbed over 1.5%.
Crude oil prices reversed gains from the previous week, as markets grew more optimistic about resolving the Iran conflict and fully reopening the Hormuz Strait. Last week, WTI declined nearly 8% to close at $94.67.
Precious metals have been highly volatile since their January downturn, showing significant weekly fluctuations. Last week, Gold increased by 2% to $4,715, while Silver rose by 6.6% to close at $80.34.
Bonds remained notably quiet last week, as markets assess whether more central banks will raise rates to counter oil-driven inflation. The 10-year UST yield decreased by 1bp to 4.36%, and the 10-year Bund rose by 0.4% to close at 125.717.
Equities remain the most optimistic asset class, looking beyond the current Iran situation and factoring in a gradual normalisation. This is a risky scenario, as the semiconductor rally has been exponential and may be due for a sharp correction. Nevertheless, there is currently no technical indication that this rally is ending. The S&P 500 index climbed 2.5% last week, reaching new all-time highs at 7401, and the DAX increased by 0.2% to 24338 points.
Cryptocurrencies continued to align with risk last week, gaining ground and pleasing bulls. Currently, Bitcoin is up 3% at $80,500, and Ethereum has risen 1% to $2,325.
The Week Ahead:
Next week features important economic data releases: US CPI & Retail Sales, and UK & EU GDP. However, these may once again seem insignificant as focus remains on developments in the Iran conflict. Expect daily volatility, so trade cautiously and manage position sizing accordingly.
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