As we edge towards the end of the year, many events often surprise markets. Last week, the ECB and BoC cut rates as expected, but the SNB cut 50bps rather than the 25bp that was expected. Meanwhile, the USD remains the strongest of the major currencies as economic data continues to disappoint in the Eurozone and the UK. The week’s other leading movers were the Yen falling on dovish BoJ comments and yields rising sharply again.

The US Dollar is still strong, but markets now expect much from the incoming Trump administration. The big question is whether Trump can indeed deliver on all of his promises, with the main one being the significant reduction in government expenditure. Last week, the DXY index rallied 0.9% to close at 106.945. 

The Euro lost ground against the greenback but was relatively stable against other currencies. The ECB and Lagarde made no unexpected statements, so the single currency didn’t exhibit much volatility. 

Sterling crept lower as the UK GDP was surprised with a negative print.

Commodity currencies fell during the broad Dollar rally. The NOK performed best with only a marginal drop; the CAD and AUD fell around 0.5%, and the NZD shed 1.2% against the greenback. Elsewhere in FX, the CHF dropped 1.6%, and the JPY crashed 2.4% lower. 

Crude Oil bounced back strongly from the support zone we mentioned last week, but it’s still not out of the woods yet. Last week, the WTI rallied nearly 6% to close at just above $71. 

Precious metals were having a good week until Donald Trump said he would do “great things” with crypto. This led to instant selling by algorithms, which are still convinced that money will continuously flow out of precious metals and into cryptos. Last week, Gold closed 0.6% higher at $2,649, and Silver was 1.3% lower at $30.55.

Bonds ended their recent rally with a sharp reversal lower. Last week, the 10-year UST yield rose 25bps to close at 4.40%, and the 10-year Bund fell over 1% to close at 134.388 points. 

Equities cannot post meaningful negative weeks, as dips keep getting bought. We are now firmly within the “Santa Claus rally” period, so theoretically, they should continue to creep higher into year-end. Last week, the S&P500 index fell 0.6% at 6044, and the DAX gained 0.1% to close at 20405 points. 

Finally, crypto-currencies are consolidating sideways following Bitcoin’s achievement of the big $100k level. How much more bullish can sentiment become on cryptos? How many more positive developments can be priced in before they happen? Crypto bulls should be cautious as the market is very one-sided, and the chances of a sharp reversal are elevated. At the time of writing, Bitcoin was up 2% at $101,400, and Ethereum was down nearly 3% at $3,880.

The Week Ahead:

The week ahead should be another very lively one despite the holiday season being in full effect. Many major central banks are still surprising to the dovish side, but all eyes will be on the Federal Reserve. A 25bp cut is completely priced in, but whether they will pause afterwards. 

Data-wise, we have interest rate decisions from the BoJ, the BoE, and Norges Bank, as well as US GDP and a broad number of PMIs.

Market Commentary: This communication is for informational purposes only. It is not intended as an offer or solicitation to purchase or sell any financial instrument. All market prices, data, and other information are not warranted as complete or accurate and are subject to change without notice. Any comments or statements made herein do not necessarily reflect those of Coeus Capital. Coeus Capital does not assume any liability whatsoever for the content of this newsletter or make any representations or warranties as to the accuracy and completeness of any information contained in this newsletter.