Another eventful week unfolded in the world of finance, marked by central bank rate decisions and their associated surprises. The Fed, in line with expectations, maintained interest rates, but the Bank of England (BoE) and the Swiss National Bank (SNB) took a clear dovish stance by leaving rates unchanged. This week’s developments indicate that major central banks are nearing the end of their current tightening cycles.
The US Dollar recorded marginal gains over the week, maintaining its overall strength despite a slight loss in momentum. The DXY index rose by 0.2%, closing at 105.582 points.
The Euro experienced a relatively calm week as attention shifted to the Dollar and the Pound. Eurozone CPI came in 0.1% lower than expected but did not trigger significant volatility.
The British Pound remains in a downtrend, with the BoE’s decision to keep rates unchanged adding more pressure. Weak UK economic data suggests this downward trend may persist.
Commodity currencies showed strength, marking a departure from recent trends. The AUD and CAD made modest gains, while the NOK and NZD surged by 0.7% and 1.1%, respectively. In other currency movements, the dovish stance of the Bank of Japan (BoJ) caused the JPY to retreat by 0.4%, and the CHF and MXN both declined by approximately 1% against the USD.
Oil experienced a slight pullback but maintained its clear uptrend. WTI fell by 1% to close at $90.29.
Precious metals had a decent week, especially considering rising yields and the Dollar’s strength. Gold posted marginal gains, reaching $1,925, while Silver rallied over 2% to $23.55.
The Week Ahead:
Equities are starting to show signs of weakness, potentially aligning with negative global fundamentals. While high yields may exert downward pressure on equities, central banks adopting dovish stances could provide support. The S&P500 index fell by 3% to 4318 points last week and is now eyeing strong support at 4200, which was the original breakout level. The DAX index fell over 2% to close at 15550 points.
Bonds continue to trade weakly, with the 10-year UST yield breaking above resistance and closing 12bps higher at 4.44%, while the 10-year Bund fell 0.5% to 129.607.
Cryptocurrencies are in consolidation mode once again, signaling an imminent significant move. While they are correlated with risk, the recent equity market decline has not yet affected them. At the time of writing, Bitcoin is flat at $26,500, and Ethereum is down $40 at $1,600.
The focus in the week ahead should be on yields. If the breakout higher is confirmed, it is likely that risk assets will continue to trend lower. From a data perspective, it’s another busy week, with the spotlight on the US GDP and Core PCE releases. Wishing you good luck in your trading endeavors!
