Risk-on continues its trend

Last week we saw a return to a risk-on environment. The US Inflation report muted any calls for US interest rates to move higher leading to an equity rally and risk-on currency move.

The DXY ended lower by 0.8% as equity markets took over the main focus. The Dow broke 40,000 for the first time on Friday. The main economic number was US CPI which showed that inflation was cooling which if continues could lead to the Fed being back on track to lower rates in the 2nd half of 2024.

 

This risk-on led to the higher beta currencies to rise. Kiwi was the standout winner, but Aussie was the lagger. Wage growth in Australia exceeded expectations but unemployment unexpectedly rose to 4.1%.

 

Both GBP and Euro had a better week. GBP found support as good wage growth data and BoE hitting that a summer rate cut remains not unreasonable however any cut in June seems highly unlikely.

 

Oil followed other commodities higher. WTI rallied just 1.7% to close just below $80.

 

Next week we will have to wait and see if the risk on mood continues. The stocks could defy expectations and continue to drive higher with Bond strength and dollar weakness the driver here.

 

We have more PMI from the UK and the RBNZ Interest rate decision.

Weekly Majors’ Market Performance

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