In the past week, the overseas markets were in turmoil

Over the past week, overseas markets have been turbulent, with various assets experiencing significant fluctuations.

In the first half of this week, inflation exceeding expectations led to a decline in market focus on the Fed's interest rate cut expectations; in the second half of the week, tensions in the Middle East escalated, with the Iran-Israel dispute influencing asset trends.

Driven by the decline in interest rate cut expectations and safe-haven demand, the US dollar saw its largest weekly gain since 2022; geopolitical risks led to the largest weekly decline in US stocks since October last year, with US bonds experiencing significant volatility.

The hottest asset at the moment, gold, continues to rise, causing Wall Street to "doubt life," while oil prices have also surged to a new high in six months.

US Dollar Sees Largest Weekly Gain Since 2022

The US dollar index surged by 1.7% this week, marking its best weekly performance since September 2022.

The Fed's interest rate cut expectations and geopolitical tensions are jointly driving the US dollar higher. On one hand, the US CPI rose by 3.5% year-on-year in March, higher than expected, leading the market to speculate that the Fed may only cut interest rates once this year. In contrast, in early January this year, the market expected the Fed to cut interest rates by 25 basis points six times.

Quentin Fitzsimmons, Senior Portfolio Manager at T. Rowe Price, pointed out:

The current situation in the US is very unique, with very loose fiscal policy and tight monetary policy, which is the secret to the strong US dollar. The key word currently popular in the market is "differentiation."

On the other hand, Iran strongly condemned Israeli airstrikes on the Iranian consulate in Syria, increasing the likelihood of conflict between the two countries, which also boosted the recent performance of the US dollar.

The strength of the US dollar has been tough on non-US currencies, with the Japanese yen being hit the hardest, falling to its lowest level since 1990 against the US dollar; the euro also struggled, falling by 1.8% against the US dollar this week, marking the largest weekly decline since September 2022.

Analysts warn that the continued strength of the US dollar will pose challenges to countries that hope to cut interest rates but do not want to weaken their own currency or accelerate inflation. Interest rate cuts usually lead to currency depreciation, which in turn can push up import prices and exacerbate inflation.

US Stocks See Largest Weekly Decline Since October Last Year

This week, the three major US stock indices fell by over 1%, with the S&P 500 index experiencing its worst week since October last year, and the Dow Jones hitting its largest weekly decline since the collapse of Silicon Valley banks, with stock market volatility soaring on Friday.

The rise in US bond yields and geopolitical turmoil are the main factors, as Wall Street cuts its interest rate cut expectations for this year. Despite the aggressive valuation of risk assets, it is becoming increasingly risky, with Goldman Sachs currently forecasting two interest rate cuts, lower than the previous expectation of five cuts, while Barclays expects only one rate cut this yearAs the tension between Israel and Iran escalates, Yardeni Research analysts pointed out:

The S&P 500 index is almost vertical, and if a conflict really breaks out between Israel and Iran, this may be the top.

It is worth mentioning that the so-called "fear index" VIX index on Wall Street has risen to the highest level since October last year, with analysts warning that the market has long underestimated geopolitical risks.

US Treasury Bonds Surge After a Sharp Decline

US Treasury bonds experienced ups and downs this week, first going through the worst two trading days since February, with yields rising to yearly highs, followed by a slight easing of the upward trend.

CPI drove the 10-year US Treasury yield to break through 4.5%, and the 2-year yield once exceeded 5% for the first time since November, facing the most severe sell-off in months for two consecutive days.

Subsequently, safe-haven demand pushed US Treasury bonds to rebound, with market expectations of escalated tensions in the Middle East. US Treasury bonds rebounded significantly on Friday, with yields on 2-year to 10-year bonds plummeting by as much as 10 basis points.

Gold Prices Surge, Wall Street "Doubts Life"

Gold, the hottest commodity recently, has repeatedly hit historical highs, causing doubts on Wall Street.

Spot gold rose by 1.3% this week, an increase of $30.50 per ounce, closing at $2356, reaching around $2431 at one point, with a cumulative increase of 14% since the beginning of the year.

Chris Mancini of GOLDX Mutual Fund stated that despite outflows from gold ETF funds in recent months, the price of gold is still rising. The most reasonable explanation is demand from China, possibly driven by individual Chinese investors.

According to TD Securities, there is a surprising correlation between buying trends and pressure from currency depreciation in a country.

Wall Street has belatedly raised its target price, with Goldman Sachs bullish at $2700, Bank of America expecting $3000, and UBS calling for a high of $4000.

Oil Prices Hit 6-Month High

Oil prices have intensified, with the global benchmark Brent crude oil briefly surpassing $92 per barrel, rising to the highest level since October, with oil prices soaring 19% since the beginning of the year.

The escalating tension in the Middle East has disrupted the oil market. According to CCTV News, on April 1st, the consular department of the Iranian Embassy in Syria was hit by Israeli missiles. Following the attack, a spokesperson for the Iranian Ministry of Foreign Affairs strongly condemned the incident and stated that Iran reserves the right to take countermeasuresEd Yardeni, founder of the well-known Wall Street bull and market research firm Yardeni Research, pointed out that oil prices could reach $100 in this situation, and the Middle East situation has also weakened the upward momentum of US stocks