UK says no one died from covid-19 yesterday

Great news in the UK

What a wonderful headline.
Medicine and vaccines are an absolute marvel. The UK is getting closer to normal every day and aside from today’s blip, GBP has reflected that.
I expect more upside in the coming years in GBP as it emerges from the clouds of covid and Brexit.
More than 128,000 people in the UK have been killed by covid but the daily average over the past seven days has fallen to just 8.

European shares in the day higher. German Dax closes at record high

France’s CAC closes at the highest level since 2000.

The German DAX is closing up about 1% and in doing so is closing at a new all-time high.  The France’s CAC is also closing higher and at the highest level since August 2000. Below is a look at the daily chart of the German Dax.

France's CAC closes at the highest level since 2000.

A look at the provisional closes shows:
  • German DAX, +1.0%
  • France’s CAC, +0.7%
  • UK’s FTSE 100, +0.9%
  • Spain’s Ibex, +0.6%
  • Italy’s FTSE MIB, +0.7%
In the European debt market, the benchmark 10 year yields are closing mostly higher with the UK yield up 3.3 basis points.
European yields are mostly higher
In other markets as Europe/London traders look to exit for the day:
  • Spot gold is trading down seven dollars or -0.37% at $1899.70.
  • Spot silver is trading unchanged at $28.03
  • WTI crude oil futures are up $1.49 or 2.23% at $67.81. The high price extended to $68.87. That was the highest level since October 2018.
US stocks are trading mixed with the NASDAQ lower. The Dow and S&P are higher but well off the session highs:
  • S&P index up 5.24 points or 0.12% at 4209.30
  • NASDAQ index -15.67 points or -0.11% at 13732.20
  • Dow up 137 points or 0.4% at 34666.90

Eurozone May preliminary CPI +2.0% vs +1.9% y/y expected

Latest data released by Eurostat – 1 June 2021

  • Prior +1.6%
  • Core CPI +0.9% vs +0.9% y/y expected
  • Prior +0.7%

The headline reading is the highest since November 2018 as it reaffirms stronger inflation pressures, which could owe to some part in base effects and also higher input cost inflation across the region/globe.

Core inflation meets estimates and is keeping just under 1%, so that might not raise too many eyebrows at the ECB just yet but watch for the trend in the months ahead.

Oil climbs to highest level since October 2018 ahead of OPEC+ meeting

WTI up by 2.8% to $68.20 currently

WTI D1 01-06

Oil is searching for a break to the topside as price now extends to its highest since October 2018 with buyers pushing price action above $68 at the moment.

The bullish run in oil so far this year is staying the course and there is still little to suggest the momentum from being derailed – even from a technical perspective.
It remains to be seen if buyers can keep with the break above $68 before the day ends with OPEC+ still a key risk factor to the equation.
The bloc is expected to stick with the status quo for now but there might be hints on what they may do later in the year if demand conditions continue to pick up globally.
The restart of production may temper with sentiment a little but I still don’t imagine that to totally outweigh the bullish sentiment on the reopening and the reflation narrative.
Even if gains may be reined in briefly during the short-term, there is still much to be bullish about oil in the long-term; at least for the time being.

Eurozone May final manufacturing PMI 63.1 vs 62.8 prelim

Latest data released by Markit – 1 June 2021

The preliminary report can be found here. The slight revision higher fits with the revisions to the French and German readings earlier as it reaffirms the strongest reading in the survey’s history, with robust performances across the region:
Markit notes that:

“Eurozone manufacturing continues to grow at a rate unprecedented in almost 24 years of survey history, the PMI breaking new records for a third month in a row. Surging output growth adds to signs that the economy is rebounding strongly in the second quarter.

“However, May also saw record supply delays, which are constraining output growth and leaving firms unable to meet demand to a degree not previously witnessed by the survey.

“High sales volumes are consequently depleting warehouse stocks and backlogs of uncompleted work have soared at a record pace. While these forward-looking indicators bode well for production and employment gains to persist into coming months as firms seek to catch up with demand, the flip-side is higher prices. The combination of strong demand and deteriorating supply is pushing up prices to a degree unparalleled over the past 24 years.

“The survey data therefore indicate that the economy looks set for strong growth over the summer but will likely also see a sharp rise in inflation. However, we expect price pressures to moderate as the disruptive effects of the pandemic ease further in coming months and global supply chains improve. We should also see demand shift from goods to services as economies continue to reopen, taking some pressure off prices but helping to sustain a solid pace of economic recovery.”

Dollar a touch on the softer side for now

Dollar keeps mildly lower across the board to start the session

EUR/USD is trading near session highs at 1.2240 as buyers start to look back towards the May highs near 1.2266 in hopes for a stronger breakout:
Adding to that is GBP/USD also keeping close to the 24 February high @ 1.4241 following the daily close above the 1.4200 level yesterday:
Elsewhere, AUD/USD is back up to 0.7760 from 0.7740 following the RBA decision earlier while USD/CAD is also seen slipping to 1.2035 from 1.2050-60 levels earlier in the day.


The technicals are what is important here in my view and the ones in EUR/USD and GBP/USD are worth taking note in case it exacerbates the dollar’s vulnerability after the decline seen yesterday to start the week.

RBA leaves cash rate unchanged at 0.10% in June monetary policy decision

Latest monetary policy decision by the RBA – 1 June 2021

  • Prior 0.10%
  • 3-year bond yields target 0.10%
  • 3-year government bond yields is consistent with RBA target
  • Australian recovery is stronger than earlier expected and is forecast to continue
  • Central scenario is for GDP to grow by 4.75% over this year and 3.50% over 2022
  • An important ongoing source of uncertainty is the possibility of significant outbreaks of the virus, although this should diminish as more of the population is vaccinated
  • While a pick-up in inflation and wages growth is expected, it is likely to be only gradual and modest
  • RBA will consider in July whether to retain the April 2024 bond as the target bond for the 3-year yield target or to shift to the next maturity, the November 2024 bond
  • RBA is not considering a change to the target of 10 basis points
  • AUD remains in the upper end of the range of recent years
  • RBA will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range
  • This is unlikely to be until 2024 at the earliest
  • Full statement
The aussie dropped on the decision from 0.7760 to 0.7740 against the dollar but honestly, I don’t see anything in there that is a material difference to the May policy meeting.
There was a slight downside risk bias added to the statement as the RBA acknowledged the recent virus situation in Victoria but they did also brush it off to saying that it should be easily dealt with as vaccinations start to pick up across the country.
Besides that, we’ll just have to wait until July for any changes by the RBA.

Forecasts for Chinese yuan raised for Q2, Q3 2021

HSBC cite the currency strengthening more than expected recently, forecasts:

  • Q2 6.25 (from prior forecast at 6.5)
  • Q3 6.45 (also from 6.5)
  • End 2021 fall back to 6.6 (unchanged from previous)
Net FX inflows to China have moderated slightly YTD, HSBC expects this narrowing trend to continue and to quicken in 2H and 2022
  • “China is unlikely to deliberately strengthen the RMB so as to curb rising import costs” 
  • “The recent surge in commodity prices is partly supply-side driven, rather than due to China’s demand”
On the Fed:
  • “The Fed may be patient about rate hikes, but it will have to taper its asset purchases eventually” 
Info via Bloomberg
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