Weekly Market Recap

In terms of data, it was a quieter week than the week before, and the markets had some time to calm down after the agreement on the US debt ceiling. With the US CPI and interest rate decision coming up this week, the markets consolidated and are now waiting for a reaction to these two major events.

The US dollar traded under pressure for most of the week as next week's FOMC decision could mark the end of this interest rate hike cycle. Inflation remains important and is expected to continue falling on a year-over-year basis. Last week, the DXY index fell 0.5% and closed at 103,553.

The euro fell further last week after most economic data from the eurozone disappointed, with GDP prints in negative territory. The single currency rose 0.4% against the USD but fell against most other majors.

Sterling had a decent week as UK PMI remained resilient and the economy continues to show decent strength. The EURGBP continued its decline from the 0.90 level and fell another 0.6% to 0.8541 last week. The next medium-term target for this pair is the 0.83-0.835 support zone.

Commodity currencies had a second strong week in a row as the USD fell back and risk continued to rise. Surprise interest rate hikes by the BoC and the RBA also helped! Last week the CAD rose 0.6% against the dollar, the NZD rose 1.2% and the AUD & NOK rose over 2%. Elsewhere in FX, the JPY and CHF rose about 0.5%.

Oil is still extremely volatile with violent daily and weekly swings, but it remains within the broad $64-$84 channel. Last week, WTI fell more than 2% and closed at $70.29.

Precious metals have shown resilience in light of strong U.S. employment data and rising yields. Is this the final consolidation before a gold breakout to new all-time highs? Next week's U.S. numbers will surely provide the answer. Last week, gold rose 0.7% to $1,961 and silver shot up nearly 3% to close at $24.28.

Equities remain very resilient and the path of least resistance still seems to be upward. You could argue that stock indices are rich according to many statistics, but the market seems to want to squeeze higher right now. Last week the S&P500 index rose 0.5% to 4302 points and it is quite possible that there are many stops above that. A weak U.S. CPI and/or a dovish Fed could push us higher towards 4400, so shorts should be cautious! European indices fared worse, with the DAX, in particular, falling 0.6% and closing at 15,959 points.

Bonds rose last week, but we could be heading for strong resistance. Last week, 10y UST yields rose 6bps to 3.75%, with 3.90% being an essential level. The 10y Bund fell 0.9% and closed at 134.161 points.

Finally, cryptocurrencies had an absolutely terrible week. The SEC's indictment of Binance - now the world's largest crypto exchange - sent shock waves through the market, which was still recovering from the FTX disaster. This was another blow to confidence in the crypto sphere, and prices moved to reflect that. At the time of writing, Bitcoin stands 5.5% lower at $25,700 and Ethereum nearly 8% lower at $1,750.

The coming week:

The week ahead is going to be huge! The Federal Reserve leads the way among central banks and they will no doubt wait for the CPI release to adjust policy. A weak release could be a major top for the USD and interest rates, but a strong release will certainly shock the markets (who still expect interest rate cuts in 2024).

We also have interest rate decisions from the ECB and BoJ, GDP releases from the UK and New Zealand, and CPI releases from the Eurozone.

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