More Putin: US to blame for all of the worsenings of relations

The superpowers remain foes

More from Putin on meeting with Biden:
  • Each side understands red lines
  • Conditions not right for a meeting in Moscow or Washington
  • Biden is a very constructive, balanced person.
  • US to blame for all of the worsening in relations
  • We didn’t feel any pressure from US side in talks
  • Talks were fruitful
  • He saw glimpse of hope about mutual trust
  • On sanctions, says it’s hard to say if pro-Russia or anti-Russia policies and US will prevail
Let’s face it, Russia and US will remain adversaries.

Putin says Russian and US envoys will be returned

Good sign from talks

  • Foreign departments to start talks on diplomatic track
  • Ukraine was discussed but there’s nothing to discuss on Ukraine’s entry to NATO
  • Putin said trade, arctic and strategic nuclear capability were discussed
This was billed as a set of talks aimed at starting deeper talks and this certainly looks like a successful step. Ambassadors will be returned to national capitals.
The ruble is threatening a two-day high.

Modest changes in the European major indices today

Mixed closes for the major European indices

The major European indices are closing mixed with modest changes. The snapshot of provisional closes shows:

  • German DAX, -0.1%
  • France’s CAC, +0.2%
  • UK’s FTSE 100, +0.3%
  • Spain’s Ibex, -0.2%
  • Italy’s FTSE MIB, +0.2%
In the European debt market, the benchmark 10 year yields are all down around  -1 to -1.6 basis points.
Mixed closes for the major European indices_In other markets as London/European traders look to exit:
  • Spot gold is trading down $0.56 or -0.03% at $1858.46.
  • Spot silver is up nine cents or 0.36% $27.76
  • WTI crude oil futures are up $0.77 or 1.07% at $72.89. The price reached a new cycle high of $72.99
  • Bitcon is trading down -$1158 or -2.9% at $38,797
in the US stock market, the major indices remain mixed:
  • S&P index -1.5 points or -0.04% of 4245.20
  • NASDAQ index +12.3 points or 0.09% at 14085.20
  • Dow -26.02 points or -0.07% at 34274.61

FX option expiries for 16 June 10am New York cut

A look at what is on the board for today


Just a couple of ones to take note of, as highlighted in bold.
The chunk in EUR/USD around 1.2115-30 is likely to keep price action rangebound before they roll off, adding to the lull ahead of the FOMC meeting later in the day.
Besides that, there is some attraction for USD/JPY closer towards 110.00 in the days ahead with the expiries today likely to support things going into North American trading.
Elsewhere, there is also still some decent expiries seen for AUD/USD around 0.7700 and 0.7750 so that could keep price action more sticky in the days ahead as well.
That said, a lot depends on the reaction to the Fed so there’s that to consider.

Ifo cuts German growth forecast this year from 3.7% to 3.3%

Ifo releases its latest forecasts for the German economy

  • 2021 GDP growth cut from 3.7% to 3.3%
  • 2022 GDP growth lifted from 3.2% to 4.3%
  • 2021 inflation to jump to 2.6%
  • 2022 inflation seen easing to 1.9%
The cut in the growth forecast for the year is attributed to supply bottlenecks, which in turn is also manifesting in higher price pressures i.e. inflation.
That is a reasonable argument but it also means that Ifo sees this supposed ‘transitory’ effect being more persistent especially in 2H 2021 as well.
Just take note of this in case more macro projections start to reflect similar sentiment, which in turn might turn the screws on central banks to do something.

What to expect from the FOMC

USD in focus

The bottom line is that no change is expected tonight in terms of interest rates or bond tapering. However, the interesting part of tonight will be on the economic and inflation forecasts along with the interest rate projections. Here is what a survey of51 economists expect who were surveyed between June 04-June 10.

Bloomberg Economists


  • Greater than half of the economists surveyed expect the Fed’s ‘dot plot’ to show an earlier lift off for rates in 2023.
  • 2 out of 5 (40%) expect the Fed to take its first step in tapering monthly bond purchases in August at the Jackson Hole Symposium (August 26-28).
  • One third expect a tapering announcement in September and another third say December


Labour targets?

The Economists surveyed expect the Fed to be generally upbeat about the robust economic rebound this year. However, bond tapering is expected when unemployment is around 5% and inflation is at 3% as measured by the personal consumption expenditure price index. The April core PCE deflator reading came in at 3.1% y/y, the highest since 1992, but unemployment is still too high. There have been two main reasons that labour supply is weak. Firstly,

  • Lack of child care issues and home-schooling which means some parents had to stay at home
  • Extended unemployment benefits means the urgency to return to work has been reduced. These benefits are set to continue until September

Risk of overheating

Higher inflation numbers have shifted the risks to the economic outlook with 65% of those surveyed seeing a risk of the US economy overheating due to an accelerating US vaccination program and fiscal stimulus set to rise with Joe Biden’s infrastructure and jobs plan.

The takeaway

The USD is trying to bottom and the Fed should signal a slightly better picture. The obvious USD buy trade would be if bond tapering is announced or a timescale hinted at. A shift in the dot plot will also likely help lift the USD too. Risk looks asymmetric for USD strength and the USDCAD pair looks due for some retracement. Let’s see what we get. If the Fed remain dovish then more USDZAR looks compelling.

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