Macro-News round-up:

After last week’s close, we saw a dollar weakening again despite the strong bullish behaviour of the previous days. Of course, all other assets adapted accordingly to this movement. Demand for bonds, for example, increased again, assuming a decline in long-term interest rates. Longer-dated US Treasury yields decreased. 10Y UST rates dropped to 4.248%, down 7.3bp. Only 2.2bps was lost by 2Y yields. The EURUSD held steady at just above 1.08.

The euro also recovered against the dollar and ended the week at levels over 1.08 EURUSD.

The stock markets seem to have regained their bullish tone after the scare of the US inflation rebound that triggered the sell-off. calm is returning to the markets, at least for the time being.

The SP500 is back above 5,000 points on a bullish course, the Nasdaq100 is approaching 18,000 points and the Dax40 in Europe is already above 17,400 points.

On Friday we shared on our ATFX Connect social networks the comments made in the morning by various European Central Bank officials. In them, the prevailing stance was to hold back on interest rate cuts and wait patiently for the right time to do so. Nagel: “ECB must stay the course to beat inflation”. “I see no circumstances for the ECB to cut before the Fed” said Holzmann.

We also recall at the end of the week, unemployment claims released by the US on Thursday, continued to fall.  The data continues to show a strong US labour market that does not justify an immediate rate cut, and this is the main internal debate that the Fed has. If the unemployment rate does not increase, wages will not adjust downwards, and core inflation via services will not be reduced either.  They need a weak labour market to be sure that the rate cut will not create inflationary problems.

Geopolitics: two interesting news items of note over the weekend. The first is the Secretary General’s statement recognising Ukraine’s right to use Western-supplied F-16s to attack targets beyond its borders, i.e. Russian territory.  This could lead to a significant escalation in the conflict, as one of Ukraine’s strategic problems is who will fly these F-16s.  There is a possibility that they will be Western NATO pilots, and in such a case, if Russia responds to this attack, NATO aircraft with NATO pilots attacking Russia would be shot down.

France’s finance minister, Bruno Le Maire, the brilliant strategist who predicted he would “cause the collapse of the Russian economy,” says that in order to finance the future, Europe must “mobilise all the savings of Europeans” that “lie dormant in European bank accounts.”

He is suggesting the mobilisation of citizens’ private savings to finance causes such as climate change or artificial intelligence. The point is, instead of doing so through private investment, he seems to be suggesting a seizure of citizens’ assets.  For these reasons, there has been a lot of criticism of his words from the financial sector. Perhaps a clue to what the European Union will be like once it has access to citizens’ savings via CBDC?