Weekly Market Recap

Last week was marked by the continued aggressive rhetoric of the major central bank heads. Powell, Lagarde, Bailey and Ueda all spoke and reiterated that the fight against inflation is far from over. However, many leading indicators are still falling and the already restrictive monetary policy is likely to further slow down the global economy. How much damage can "higher interest rates for longer" do? That is a question that central bank heads have to ask themselves again and again.

The US dollar showed some strength early in the week but then gave back all the gains on Friday when the PCE data came in weaker than expected. Last week, the DXY index closed largely unchanged at 102.92.

The euro extended last week's gains as inflation in the eurozone remains relatively stable and the ECB looks set to continue tightening monetary policy.

Sterling showed little movement after the BoE rate hike of 50 basis points the previous week. With inflation remaining high and average incomes continuing to rise, inflation is likely to continue to be a headache for the BoE and GBP could continue to outperform due to divergence in central bank policy.

Commodity currencies had a mixed week as the dollar trended sideways and yields rose. AUD and NZD closed marginally lower, CAD fell 0.5% and NOK rose 0.8% against the greenback. In the FX market, the CHF and MXN recovered marginally, while the JPY lost further ground as the BoJ remains dovish and refrains from FX intervention.

The oil price continues to show high volatility as there is no major news from producers. Last week, the WTI price rose 1.3% to close at $70.39.

Precious metals continue to be in retreat as yields try to break out to the upside. It has been a relentless downward move with virtually no relief rally, which has been frustrating for longs. Last week, gold was unchanged at $1,919, while silver posted a rare 1.5% gain.

Last week we said equities would continue to be in a breakout or upward mode until technicals said otherwise, and that is still the case. The S&P500 and DAX ended the week 2.3% higher at 4445 and 16184 points respectively.

Bonds were dragged down as the market continues to rule out rate cuts in the coming months and prices are "higher for longer". Last week, the 10-year UST yield rose 8 basis points to 3.82% and the 10-year Bund fell 0.2% to 133.743 points.

Finally, cryptocurrencies consolidated their previous week's gains after the Blackrock ETF announcement. The sentiment seems to have turned from bearish to bullish recently, which could give cryptocurrencies another push higher in the short term. At the time of writing, Bitcoin and Ethereum are broadly unchanged at $30,400 and $1,910 respectively.

The week ahead:

There will be a lot of economic data released in the coming week. We have a number of services and manufacturing PMIs, the RBA interest rate decision, and we close the week with the US ADP, JOLTs and NFP employment data.

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