Weekly Market Recap

Last week was another interesting one, with further signs that inflation is starting to slow down around the world. Even the UK - one of the countries with the most stable inflation readings - finally showed signs of weakness.

The US dollar was always due for an upward correction after a series of terrible weeks, and that's exactly what we got last week. The DXY index rose over 1% last week and returned above the key former support level of 100.80 - will it be able to hold these gains? The likely answer is no, but we will see next week with the upcoming Federal Reserve interest rate decision!

As expected, the Eurozone CPI came in at 5.5% year-on-year, which gave support to the Euro as it is widely expected that the ECB will tighten monetary policy further. Last week, the euro gained ground against most major currencies except the USD.

UK inflation disappointed on the downside but remains high relative to other Western countries. The main question now is whether the Bank of England will raise interest rates by 25 or 50 basis points at its next meeting. Last week, the pound lost 0.9% against the euro and 1.8% against the dollar.

Commodity currencies suffered from dollar strength and even a rising oil price could not provide them with support. Last week, the CAD and NOK weakened slightly against the USD, the AUD lost 1.6 % and the NZD plunged by over 3 %. The foreign exchange markets saw a similar picture, with the USD outperforming: the CHF fell by 0.4 % and the JPY by 2.3 %.

The oil price had another positive week, its fourth in a row. Last week, the WTI price rose by 2.1% to close at $76.77.

Precious metals naturally met resistance as the dollar rose, but managed to avoid heavy losses. Last week, gold rose 0.4% to $1,962 and silver fell 1.3% to close at $24.62. If the dollar does not recover further, precious metals are likely to continue their upward movement.

Equities have shown resilience in recent weeks and from a technical perspective there are no signs yet that the uptrend is over. Trying to find a top has been a painful experience for the bears, and until proven otherwise, it remains a risky bet. Last week the S&P500 index rose 0.7% to close at 4537 points and the DAX also rose 0.6% to 16174 points.

Bonds had a very flat week, eventually giving back their gains from earlier in the week. The US 10-year yield rose 1 basis point to 3.84% and remains within a very important zone. The most likely scenario is that these levels will act as resistance and yields will continue to fall, but that remains to be seen. Last week, the 10-year Bund rose 0.3% to close at 133.126.

Finally, cryptocurrencies are trading broadly sideways for the fourth week in a row, still consolidating their strong gains from a month ago. At the time of writing, Bitcoin and Ethereum are around 2% lower at $29,900 and $1,895 respectively.

The week ahead:

The coming week will be important as we wait to see if the dollar - and therefore yields - can break out to the upside. In terms of data, it will be another busy week with various PMI releases and inflation data from Australia, Japan and Germany. The highlight, however, is likely to be the interest rate decisions by the US Federal Reserve and the ECB (with a widely expected 25 basis point rate hike) and their statements.

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