Key Stories from the past week: Bonds rally as conditions turn more dovish and currencies fluctuate on central bank updates.

The week was marked by Nvidia becoming the world’s largest company by market cap as the tech giant continues to draw in new investors at pace. Amongst Saxo clients we also saw inflows into major equity ETFs such as MSCI World, Core S&P 500 and S&P 500 Info Technology sector. Activity in Forex was brisk as Yen weakness and dovish moves from the SNB and BOE central banks provided opportunistic price action.

Yen testing previous intervention level

The Japanese yen weakened to its lowest levels since the intervention in early May, with USDJPY at the 159-level as US dollar strength and resurgent carry trades caused by interest rate differentials hurt the Japanese currency. At the same time the US Treasury added Japan to its monitoring list for currency manipulators, indicating limited potential for intervention.

JPY: Three-way pressure piling up

UK macro a non-event – volatility remains constrained

Sterling is always a very active currency with the Saxo client base, GBPUSD and EURGBP are frequently in the top 5 most traded pairs. This week GBP was kept front of mind with both a UK CPI print, and a BoE policy meeting. Despite the high trading activity of these pairs, inline events saw relatively subdued price action. Vix has remained relatively low through June, and we can see clients are adding to volatility exposure via Vix Futures as markets await the next macro catalyst.

GBP: UK CPI and BoE details

Index concentration reminds investors to be diversified

Diversification is a cornerstone of investing, aimed at minimizing risk by spreading investments across a variety of assets. By diversifying, investors can reduce the impact of a poor-performing investment in their overall portfolio, ensuring more stable and predictable returns over the long term. Traditional diversification involves spreading investments across different asset classes such as stocks, bonds, and real estate. However, a more nuanced approach involves sector diversification, which can be effectively achieved using sector ETFs.

Diversification using US sector ETF options

Next week’s important events start with German IFO survey on Monday which could follow on from this week's ZEW miss. The focus in Asia will be the Tokyo CPI numbers on Friday which is the first inflation indicator for June. Over in the states, US Consumer Confidence is published on Tuesday and we also kay key earnings from FedEx (Tues), Micron Technology (Wed) and Nike (Thu). Nike’s earnings paired with Consumer Confidence data could paint a picture for the US consumer economy.