Weekly Market Recap

Last week, markets had reasons to be nervous and choppy, the main one being President Trump’s inauguration, which is coming up on Monday. Yields reversed lower after a monster week before, and risk assets rallied.

The US Dollar crept slightly lower, consolidating its recent gains and still looking strong. However, we must remember that Trump has always favoured a weak Dollar, and his policies could harm the greenback (much like the start of his first term). Last week, the DXY index fell 0.2% to close at 109.405.?

The Euro had a mixed week as economic data didn’t spring any surprises (Eurozone CPI came in line at 2.4% YoY).?

Sterling was under pressure again, as the UK fiscal situation remains bleak. Can the government or the BoE do something to turn things around? Gilts finally rallied for a change, but they remained vulnerable.

Commodity currencies stopped their poor run of the past few weeks but failed to make any real progress. Last week, the AUD and NZD rallied around 0.5%, the NOK gained 0.2%, and the CAD fell 0.4% against the USD. Elsewhere in FX, the CHF was broadly flat, while the JPY gained nearly 1% as BoJ rate hike expectations grew.?

Crude Oil had a fourth positive week in a row, although momentum is waning. Last week the WTI rallied 1% to close at $77.33.?

Precious metals are still looking robust in light of USD strength and rising yields. Gold, in particular, is edging towards its all-time highs, and it seems only a matter of time before it breaks above. Last week, Gold rallied 0.5% to close at $2,703, and Silver fell 0.2% to $30.35.

Bonds finally bounced back, stopping their recent major decline. The market still expects higher yields, but could we have reached a medium-term bottom? Last week, the 10-year UST yield fell 14bps to 4.62%, and the 10-year Bund rallied 0.7% to close at 131.771 points.?

Equities are still taking every opportunity and every excuse to rally further. Falling yields are usually a tailwind for risk assets, and last week was no exception. There is still no technical evidence that we are at the top in equities, so the bullish trend remains. Last week, the S&P500 index and the DAX rallied over 3% to close at 5996 and 20903 points, respectively.?

Finally, crypto-currencies performed very well during the broad risk rally, although Bitcoin was the clear leader. Bitcoin was up nearly 10% at $103,000 at the time of writing, and Ethereum was 1% higher at $3,290.

The Week Ahead:

The coming week should bring fireworks as Donald Trump is inaugurated, and he will likely pass many executive orders to start his term with a bang. It’s very difficult to predict his actions and decisions, so traders should be very cautious. Data-wise we have interest rate decisions from the BoJ and Norges Bank, as well as PMI readings from around the world.

Market Commentary: This communication is for informational purposes only. It is not intended as an offer or solicitation to purchase or sell any financial instrument. All market prices, data, and other information are not warranted as complete or accurate?and are subject to change without notice. Any comments or statements made herein do not necessarily reflect those of Coeus Capital. Coeus Capital does not assume any liability whatsoever for the content of this newsletter or make any representations or warranties as to the accuracy and completeness of any information contained in this newsletter.

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