The past week was filled with central bank activity, though their decisions and press conferences held no major surprises. Yet, there was a wave of renewed optimism regarding the conflict in Iran, with markets once again hopeful for a permanent ceasefire and a potentially mutually agreed resolution. In the currency realm, the Bank of Japan took the spotlight, initially suggesting intervention and then executing it by purchasing Yen and selling Dollars.
The US Dollar remained largely stable despite disappointing US GDP figures, with little else influencing the currency’s movement.
The Euro and the Pound also experienced minimal activity, with restricted fluctuations in the FX market.
Commodity currencies saw a slight uptick as oil prices rallied again, though the increase was not significant. Last week, the Australian Dollar, New Zealand Dollar, Canadian Dollar, and Norwegian Krone each rose about 0.5% against the Dollar. In other FX news, the Swiss Franc showed minimal movement, but the Japanese Yen surged, gaining 1.5% by the week’s end following the BoJ’s intervention.
Crude oil posted a second consecutive week of strong gains, despite the market’s apparent optimism about the Iran conflict. Last week, WTI crude surged 8% to close at $102.49.
Precious metals continued to struggle as oil and yields increased, reigniting inflation concerns. Gold dropped 2% to $4,614 last week, and Silver decreased by 0.4% to close at $75.35.
Bonds declined amidst ongoing volatile daily price fluctuations. Markets are still assessing the medium-term impact of rising oil prices on inflation and the subsequent response from central banks. Last week, the 10-year U.S. Treasury yield rose 6 basis points to close at 4.37%, while the 10-year Bund fell 0.4% to 125.246.
Equities are still searching for the positive aspects in every event and continue to look beyond the Iran conflict in hopes of a permanent ceasefire and peace. This is a risky approach, as the recent tech mega-rally could reverse, causing significant damage. Last week, the S&P 500 index rose 0.8% to 7,224 points (reaching new all-time highs), and the DAX increased by 0.7% to 24,293 points.
Lastly, cryptocurrencies are still showing significantly lower price volatility than in recent months and remain undecided on direction. At the time of writing, Bitcoin and Ethereum are both relatively stable at $78,200 and $2,300, respectively.
The Week Ahead:
This week is packed with data releases, including U.S. Non-Farm Payrolls (NFP), ADP, and Average Hourly Earnings data. Additionally, several PMI readings from around the world are expected. However, the question remains whether this data will hold significance. This weekend, Iran presented a 14-point proposal for ending the conflict. Will the Americans accept it?
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