Last week was one of the busiest in financial markets this year as various variables were controlling price action, including economic data, geopolitical tensions escalation, continuous surge of oil prices, surge in US bond yields, AI-related debt.September's consumer price index (CPI) data pointed to persistent inflationary pressures. Headline consumer prices rose 0.6% month over month, matching expectations, while annual inflation accelerated to 3.7%, slightly above forecasts of 3.6%.Meanwhile, core CPI, a closely watched measure of underlying price pressures, increased 0.3% on the month and 2.6% on an annual basis, exceeding economists' expectations of 0.2% and 2.5%, respectively.Consumer spending in the United States remained robust in September, with retail sales climbing 0.8% month-on-month after a revised 1.3% surge in August. The increase comfortably exceeded economists' expectations for a 0.3% rise.U.S. producer inflation picked up markedly in September, as the Producer Price Index rose 1.3% from August, its strongest monthly increase since March 2022, while annual growth accelerated to 6.3%. Core producer prices, which exclude food and energy, increased 0.7% on the month and 5.0% year-over-year. All readings topped economists' forecasts in a Bloomberg survey.The data as a whole supported the hawkish stance of the Fed recently expressed in most of its rhetoric.Geopolitical escalation in IranThroughout last week, ME conflict headlines highlighted reports suggesting that Washington is studying the Mother of all Bombs (MOAB) to strike Iranian energy infrastructures.This environment strongly impacted risk appetite in financial markets, and continued to push oil prices higher. MOAB, The GBU-43/B Massive Ordnance Air Blast Bomb in military speak, is among the largest conventional weapons in the U.S. arsenal, the MOAB is a 30-foot-long (9-meter) precision-guided bomb weighing nearly 21,600 pounds (9,800 kilograms). It’s dropped from an MC-130 transport aircraft, it is released on a pallet that is separated by parachute, allowing the bomb to glide smoothly toward its target under GPS guidance. Rather than relying on fragmentation, its devastating power comes from almost 18,000 pounds of explosives that produce an immense pressure wave stretching as far as a mile from the detonation point. Engineers intentionally used a thin aluminum casing to enhance the bomb's blast radius.It was first used in Afghanistan in 2017 to strike underground targets.Oil Prices Remain a ThreatOil prices continue to pose a significant inflation risk as instability in the Middle East persists. In particular, concerns remain over the Strait of Hormuz, a strategic waterway through which nearly 20% of global oil supplies pass.Any sustained rise in crude prices could feed into broader inflation in the coming months, reinforcing expectations that price pressures may remain elevated for longer.AI Debt RisksAdding to the Fed's hawkish backdrop, investors have also become increasingly concerned about rising leverage among AI-related technology companies outside the "Magnificent Seven."The issue came into sharper focus after CoreWeave shares plunged more than 16%, while Oracle fell about 9%, reflecting growing investor caution toward debt-funded expansion linked to the AI boom and raising questions about the sustainability of such spending.Warsh’s SilenceIn his speech last week, Fed’s Chair Kevin Warsh didn’t go in line with what investors were expecting as he didn’t speak about the future path of monetary policy. Warsh’s silence was more important than his words as traders started to speculate that he could decide a hold in October FOMC meeting.While Warsh's remarks tempered speculation of an imminent rate hike, his bullish view on artificial intelligence as a growth catalyst, coupled with synchronized tightening by major central banks, indicates markets may have become too complacent about future Fed tightening.FX World WeeklyThe US Dollar: the greenback hovered near 102 this week after hitting an 18-month high of 102.945 on Wednesday following stronger-than-expected September inflation data. The currency later gave back part of its gains as a selloff in equities, fuelled by renewed concerns over AI, boosted demand for safe-haven assets. While the dollar remains supported by geopolitical uncertainties and the Federal Reserve's tightening cycle, it may stay range-bound around the 102 level in the near term.The currency also was harmed by Warsh’s remarks in which he didn’t speak about tightening. Gold: the precious ended last week trading lower, pressured by strong dollar and higher US bond yields. Gold was also weakened by inflation and retail sales readings.Japanese Yen: The yen strengthened late in the week as a selloff in AI-related stocks boosted bond demand and pushed US yields lower, pulling USD/JPY back from one-month highs. Interest-rate expectations remain the main driver of the pair. 🌅continue re
Last week was one of the busiest in financial markets this year as various variables were controlling price action, including economic data, geopolitical tensions escalation, continuous surge of oil prices, surge in US bond yields, AI-related debt.September's consumer price index (CPI) data pointed to persistent inflationary pressures. Headline consumer prices rose 0.6% month over month, matching expectations, while annual inflation accelerated to 3.7%, slightly above forecasts of 3.6%.Meanwhile, core CPI, a closely watched measure of underlying price pressures, increased 0.3% on the month and 2.6% on an annual basis, exceeding economists' expectations of 0.2% and 2.5%, respectively.Consumer spending in the United States remained robust in September, with retail sales climbing 0.8% month-on-month after a revised 1.3% surge in August. The increase comfortably exceeded economists' expectations for a 0.3% rise.U.S. producer inflation picked up markedly in September, as the Producer Price Index rose 1.3% from August, its strongest monthly increase since March 2022, while annual growth accelerated to 6.3%. Core producer prices, which exclude food and energy, increased 0.7% on the month and 5.0% year-over-year. All readings topped economists' forecasts in a Bloomberg survey.The data as a whole supported the hawkish stance of the Fed recently expressed in most of its rhetoric.Geopolitical escalation in IranThroughout last week, ME conflict headlines highlighted reports suggesting that Washington is studying the Mother of all Bombs (MOAB) to strike Iranian energy infrastructures.This environment strongly impacted risk appetite in financial markets, and continued to push oil prices higher. MOAB, The GBU-43/B Massive Ordnance Air Blast Bomb in military speak, is among the largest conventional weapons in the U.S. arsenal, the MOAB is a 30-foot-long (9-meter) precision-guided bomb weighing nearly 21,600 pounds (9,800 kilograms). It’s dropped from an MC-130 transport aircraft, it is released on a pallet that is separated by parachute, allowing the bomb to glide smoothly toward its target under GPS guidance. Rather than relying on fragmentation, its devastating power comes from almost 18,000 pounds of explosives that produce an immense pressure wave stretching as far as a mile from the detonation point. Engineers intentionally used a thin aluminum casing to enhance the bomb's blast radius.It was first used in Afghanistan in 2017 to strike underground targets.Oil Prices Remain a ThreatOil prices continue to pose a significant inflation risk as instability in the Middle East persists. In particular, concerns remain over the Strait of Hormuz, a strategic waterway through which nearly 20% of global oil supplies pass.Any sustained rise in crude prices could feed into broader inflation in the coming months, reinforcing expectations that price pressures may remain elevated for longer.AI Debt RisksAdding to the Fed's hawkish backdrop, investors have also become increasingly concerned about rising leverage among AI-related technology companies outside the "Magnificent Seven."The issue came into sharper focus after CoreWeave shares plunged more than 16%, while Oracle fell about 9%, reflecting growing investor caution toward debt-funded expansion linked to the AI boom and raising questions about the sustainability of such spending.Warsh’s SilenceIn his speech last week, Fed’s Chair Kevin Warsh didn’t go in line with what investors were expecting as he didn’t speak about the future path of monetary policy. Warsh’s silence was more important than his words as traders started to speculate that he could decide a hold in October FOMC meeting.While Warsh's remarks tempered speculation of an imminent rate hike, his bullish view on artificial intelligence as a growth catalyst, coupled with synchronized tightening by major central banks, indicates markets may have become too complacent about future Fed tightening.FX World WeeklyThe US Dollar: the greenback hovered near 102 this week after hitting an 18-month high of 102.945 on Wednesday following stronger-than-expected September inflation data. The currency later gave back part of its gains as a selloff in equities, fuelled by renewed concerns over AI, boosted demand for safe-haven assets. While the dollar remains supported by geopolitical uncertainties and the Federal Reserve's tightening cycle, it may stay range-bound around the 102 level in the near term.The currency also was harmed by Warsh’s remarks in which he didn’t speak about tightening. Gold: the precious ended last week trading lower, pressured by strong dollar and higher US bond yields. Gold was also weakened by inflation and retail sales readings.Japanese Yen: The yen strengthened late in the week as a selloff in AI-related stocks boosted bond demand and pushed US yields lower, pulling USD/JPY back from one-month highs. Interest-rate expectations remain the main driver of the pair. 🌅continue re
