Last week was Non-Farm Payrolls week and it was yet another highly anticipated data release. In the end, the headline number was weaker than expected but that apparently didn’t seem to be enough to take the Fed off its tapering course. The RBNZ became the second major central bank to hike rates as expected, and there were no major surprises to shock markets either way.
The US Dollar finally took a breather after a few strong weeks, with the NFP reading putting a brake on its appreciation. The Euro failed to make any progress, hindered mainly by the terrible German economic data releases which included factory orders and industrial production was huge misses. The Pound had a decent week as bets start favouring an earlier rate hike by the Bank of England. With the strength in inflation and wage growth running past expectations, it seems that the BoE has very few options left. Commodity currencies did well on the whole, as oil continued its impressive bull run.
WTI Crude News
Oil continues to gain from the global supply chain problems and last week’s OPEC+ meeting did little to change things as the increase in production was below expectations, oil had registered yet another strong week. The WTI rose nearly 5%. Precious metals are still underperforming given the broad commodity super-rally.
Equities have been sending mixed signals for weeks now. Rising yields are a worry for equity bulls, as is the Fed’s forward guidance for tightening. For the moment, the major indices seem to be stabilising but it’s too early to call this a bottom. Bonds were sold yet again, with global yields rising further last week. Bonds seem to be driving the markets recently, so we must continue to pay close attention to them.
Bitcoin also performed well alongside traditional markets in the past 7 days as it broke and remains above $55,000 on strong fundamentals including endorsement from famed investor and philanthropist George Soros, with the announcement that the Soros’s family office holds crypto. Notably, it appears that it is institutional interest that is once again driving price action, with significant increases in open interest on CME Bitcoin Futures, where volumes are dominated by institutions. Many now expect trading volumes to remain at elevated levels, in keeping with fourth quarter trends, where the crypto market tends to attract a greater level of retail attention.
The week ahead is probably going to be quieter, given the lack of economic data releases. We are getting closer to the next FOMC meeting, where in theory we should get precise guidance regarding tapering. We also get the minutes from the last meeting, and that could provide some market action. Data-wise we have PPI data from the US and Canada and inflation data from Germany and Norway.
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