Last week, traders looking for volatility had plenty of it. There were significant moves across all asset classes, but perhaps most notable was the sharp drop in the U.S. dollar in the run-up to the June inflation report and, more importantly, after it.
The CPI numbers released on Wednesday and the following day’s PPI data surprised to the downside, reinforcing the argument that price pressures are cooling more rapidly than initially envisioned. This sentiment led traders to reprice lower the Fed‘s tightening path, reducing the likelihood of additional tightening beyond the quarter-point hike already discounted for the July FOMC meeting.
With U.S. interest rates expectations shifting in a less hawkish direction, gold prices took off after subdued behavior in recent weeks. Risk assets also commanded bullish momentum, especially rate-sensitive stocks in the technology sector. When it was all said and done, the Nasdaq 100 advanced 3.52% on the week, while the S&P 500 managed to gain 2.42%
In currency markets, the DXY index plummeted about 2.23%, breaking below the psychological 100 mark and hitting its weakest point since April 2022. Meanwhile, EUR/USD and GBP/USD staged an explosive rally, with both pairs overcoming key technical hurdles and reaching their strongest levels since the first quarter of 2022.
