Weekly Market Recap

The long-awaited US CPI figure was released last week, and it surprised the upside. While the year-on-year figure fell for the seventh month in a row, the drop in January was only 0.1% to 6.4%. This is higher than what the market had expected and interest rates rose as a result.

The US dollar index was helped by strong CPI pressure, but it failed to show particular strength; any rally was sold off each time. Last week, the DXY index rose 0.3% and closed at 103,881 points.

The euro had a quiet week as GDP and other economic data for the eurozone were broadly in line. Last week, the single currency rose marginally against the USD and GBP.

The pound lagged after misses in earnings and inflation figures but managed to recover and closed the week mostly flat.

Commodity currencies suffered as interest rates and the dollar rose. Last week, the AUD fell 0.5%, while the NZD, and CAD all fell about 1% against the greenback. Elsewhere in FX, the CHF was flat, the JPY fell more than 2%.

Oil is still trading like a rollercoaster! After a +9% week, WTI now fell 4% and closed at $76.55.

Precious metals are still trading weak as interest rates rise and the dollar creeps higher. The market's reaction is to sell metals because of high inflation, but that does not make much macroeconomic sense. Currently, metals are trading poorly, but that will undoubtedly change. Last week, gold and silver both fell just over 1% and closed at $1,843 and $21.73 respectively.

Equities should theoretically be trading much lower, due to the rise in yields. However, they show great resilience - possibly because shorts are constantly being squeezed. Every dip is bought and it feels like the pain trade in equities is higher. Last week, the S&P500 index fell 0.3% to 4077 points, while the DAX rose 1.3% to 15518 points.

Bonds continue to fall as it becomes more likely that central banks will keep interest rates on hold for longer. Last week, the 10y UST yield rose 8bps to 3.82%, while the 10y Bund fell 0.5% and closed at 135.276 points.

Finally, cryptocurrencies forgot last week's crash and rose sharply. The crypto sphere is currently trading very strongly, ignoring rising yields and generally cautious markets. At the time of writing, Bitcoin and Ethereum are both more than 10% higher at $24,600 and $1,690 respectively.

The week ahead:

The week ahead is very data-heavy, with GDP prints from the US, Germany and Mexico, the US Core PCE release, the RBNZ interest rate decision and a host of PMI releases.

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