Markets navigated a busy macro week where cooling US inflation, softer yields, and choppy AI‑related sentiment pulled in opposite directions. US CPI surprised slightly to the downside near 2.4% year‑on‑year, reinforcing the soft‑landing narrative and pushing 2‑year Treasury yields to their lowest levels since 2022, even as investors remained wary of stretched equity valuations after the recent AI‑driven run‑up.
FX Market Reactions
The Japanese yen was the standout mover, strengthening sharply early in the week as investors rotated into Japan after a landslide election win and priced in further Bank of Japan hikes, before partially retracing as US yields stabilised.
The US dollar softened against most majors as leveraged funds added to short USD positions for a third consecutive week, but the move was uneven, with EUR/USD holding around 1.19 and high‑beta FX tracking risk sentiment more than data.
Yield differentials continued to anchor price action: yen crosses were volatile, while antipodeans and sterling traded tactically ahead of key local labour and inflation prints.
Commodities Market Reactions
Brent crude slipped back below 68 USD by week’s end after failing to hold above 70 USD, pressured by inventory builds and fading geopolitical risk premia.
Gold remained well supported just under the 5,000 USD mark as softer yields and ongoing allocation into bullion ETFs offset some profit‑taking after January’s surge.
Within softs, sugar fell towards 13.5 cents per pound on improved supply prospects and weaker consumption trends, while wheat climbed to a three‑month high on crop concerns and short covering—underscoring that recent commodity moves are being driven more by positioning and flows than by a clean demand story.
Indices Market Reactions
US equities endured another choppy week: the S&P 500, Dow Jones, and Nasdaq all fell around 1.3–2.0% as mid‑week selling in mega‑cap tech and AI names outweighed an end‑of‑week bounce, signalling that any wobble on AI or rates now triggers fast rotations rather than orderly pull‑backs.
European equities initially followed Wall Street higher, with the STOXX 600 touching fresh highs before easing back, while emerging markets—especially in Asia Pacific, India, and Latin America—saw early strength fade as risk appetite cooled and oil prices drifted lower.
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