Archives of “June 16, 2021” dayrss
The superpowers remain foes
- 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
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
Oil near the highs of the day
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%
- 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
- 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
A look at what is on the board for today
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%
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.
- 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
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 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.
Japan Core Machinery Orders for April +0.6% m/m
- expected 2.5%, prior 3.7% m/m
- expected 8%, prior -2% y/y
Used as a capex indicator for Japan in the 6 – 9 months ahead