Weekly Market Recap

Last week was relatively quiet, mainly because of the US Thanksgiving holiday. Markets were relatively quiet and showed little significant movement. The minutes of the FOMC meeting show that many participants were in favour of slowing down the rate hikes. However, Jay Powell will speak next week, and the odds are that he will disappoint.?

With the lack of important economic data and general inactivity in the markets, the US dollar continued its slow slide. Last week, the DXY index fell by a further 0.8% to close just above the 106 mark.

The euro traded quietly this week, as did most other currencies. The EUR/USD closed just below 1.04, the EUR/GBP slipped to 0.86 and the EUR/JPY fell 0.3% to close at 144.45.

The pound remains one of the best-performing currencies for the third week in a row and continues to trade well following Rishi Sunak's rise. After a 1.7% rise last week, GBP/USD is currently flirting with the 1.21 level but is now likely to face solid resistance.

Commodity currencies generally performed well, while the USD continued to trend lower. AUD and NZD gained more than 1%, while CAD underperformed and ended the week unchanged. In the FX market, the JPY and CHF each rose almost 1% against the dollar.

Oil prices fell for another week and have now lost more than 20% in the last 3 weeks. The threat of another China shutdown is weighing heavily on oil, but we have now reached important technical support - it is likely that we could see a recovery in the coming week.

Precious metals should fare better as yields and the USD fall. Gold closed the week unchanged at $1753 and although it underperformed, it is still poised for an upside breakout. Silver rose 2.4% last week to close at $21.45.

The Fed's dovish minutes were well received by equities, and the fall in the USD and yields helped them rise. Last week, the S&P500 index rose 1.7% to 4029 points and the DAX rose 0.8% to 14552 points. Stock bulls should be very cautious now, as Powell could disappoint again and cause stocks to fall sharply.

Bonds continued to rise as the Fed and ECB took a more dovish stance than markets had expected. Last week, the 10-year UST yield fell 13 basis points to 3.69% and the 10-year Bund yield rose 0.4% to 140.573.

Finally, in cryptocurrencies, there are still attempts to stabilise. The impact of FTX was huge and it is unlikely that contagion could be contained. Furthermore, a hawkish Powell next week could be the trigger for another collapse; we remain very close to very important support in bitcoin. At the time of writing, Bitcoin and Ethereum are both roughly unchanged at $16,500 and $1,215 respectively.

The week ahead:

After a very quiet Thanksgiving week, things could really heat up in the coming days! Jay Powell speaks on Wednesday, and he could well provide another hawkish surprise. Risk-averse bulls should be very cautious as the market is already expecting a peak in interest rates and a return to the Fed's neutral monetary policy soon.

On the data front, more GDP, CPI, and PMI data will be released, and we close the week with the usual volatility in the Nonfarm Payrolls on Friday.

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