Bulls take Friday, but weekly losses persist

The dollar remains under pressure, suffering its worst weekly performance since November 2022 after the Dollar Index lost over 3.0% last week.

The yen was stronger across the board overnight, driven by risk aversion and a shift away from the greenback. Markets are now pricing in the probability of 75 basis points-worth of rate cuts this year.

The euro emerged as the standout performer, marking its best week in 16 years on the back of German reform optimism. Bank of America now sees the euro at 1.1500 by year-end, reflecting newfound strength amid the dollar’s struggles.

Gold and silver both started the new week modestly higher, supported by safe-haven demand, mixed economic data and ongoing dollar weakness. Despite the uptick, the gains remain measured as traders continue to assess the broader risk landscape.

Oil held flat at around $67 per barrel, with the same familiar supply and demand story keeping bullish sentiment in check. The $65 level continues to act as a key support, with traders eyeing any potential catalysts to push prices decisively higher or lower.

Crypto markets remained volatile, with Bitcoin plunging 7% at its worst levels overnight as Trump’s strategic reserve plan for the sector fell apart. Sentiment remains fragile, and traders are wary of further downside as uncertainty lingers.

The VIX futures contract for March pushed up over 22, indicating that volatility remains elevated as tariff-related uncertainty continues to grip the markets. This marks another session in which an uptick in risk sentiment drives investor sentiment, and the current environment suggests little relief in sight.

Today is shaping up to be a relatively quiet session on the data front. However, inflation and jobs reports are set to grab attention later in the week, and the Fed’s blackout period begins ahead of next week’s key March quarterly meeting. This means no comments from Fed officials, leaving markets to interpret the incoming data without central bank guidance.

In political news, former Bank of England chief Mark Carney won the race to become Canada’s new prime minister, adding a fresh dynamic to the economic outlook. Meanwhile, over the weekend, Trump appeared on FOX and described the economy as being in a “transition phase” when asked about the risk of a US recession.

Investors should also keep an eye on the SPX quarterly shake-up, with index funds adjusting to new inclusions—DoorDash, TKO, Williams Sonoma and Expand join the index, while BorgWarner, Teleflex, Celanese, and FMC are dropped.

As the new week begins, markets are grappling with elevated volatility and a dollar struggling to find a foothold. Last week’s sharp decline left the dollar reeling, and finding support will be crucial to stabilising sentiment.

The yen and euro continue to benefit from the greenback’s weakness, while safe-haven demand props up gold amid ongoing political and economic uncertainty.

With inflation and jobs data set to hit later in the week and the Fed on pause ahead of its quarterly meeting, markets are left to navigate the financial seas without much guidance. The tariff situation continues to add unpredictability, while oil’s support of around $65 remains a focal point. Staying vigilant and reactive to headline risks will be essential as the week unfolds—expect more volatility in the days ahead.