[Market Review
Spot Gold this week before the Fed resolution is not very volatile, mainly in the 1722-1737 range narrow fluctuations, Thursday morning after the Fed resolution was announced, spot gold pulled up sharply, up to $ 1755.39, Thursday during the European session fell back sharply, once below the 1720 mark. On Friday, spot gold fluctuated up and down around $1740. Spot silver followed the gold trend, also in the early hours of Thursday saw a sharp rise, then retraced the gains, but still fluctuate above $26.
U.S. bond yields spiked again this week, with the 10-year U.S. bond yield spiking above 1.75% on Thursday night, a new high since last January, and the 30-year U.S. bond yield rising above 2.51% at one point, a new high since July 2019. Both yields then retreated, with the 10-year U.S. bond yield still hovering near 1.70%, and the Federal Reserve announced that the Supplemental Leverage Ratio (SLR) relief will expire on March 31, with the 10-year U.S. bond yield rising briefly above 1.74% as of this writing.
In the oil market, the U.S. and Cloth have continued to weaken this week and have closed lower for five consecutive trading days since last Friday. This Thursday evening is a sudden plunge, a heavy drop of 8%, the U.S. oil from $ 64 above all the way down to $ 58; cloth oil fell to a low of $ 61 near, Friday, both oil are a small recovery, the U.S. oil back to $ 60 above, cloth oil is back to $ 63 above.
In the currency market, the dollar index has been rising slightly before the Fed resolution, after the resolution was announced in the early hours of Thursday, the U.S. index fell straight down, from 92 above to 91.40 near, and then recovered sharply, basically recovered lost ground, back to the 92 mark; the euro against the dollar is the opposite of the U.S. index trend, continued to fall before Thursday, the Fed resolution after a brief pull up, but soon returned to the downward trend, currently at 1.1900 Below the mark; pound against the dollar on Tuesday once down to 1.3800 mark, then rebounded all the way to the 1.40 mark, has now fallen back to 1.3910 near.
Bitcoin again experienced big gains and big losses. Last weekend, Bitcoin hit a new high again, breaking $61,000 per coin, then fell back sharply, dropping back to near $53,000 on Tuesday, then shocked to the upside. Bitcoin rallied back to above $59,000 on Friday, and is likely to test the $60,000 mark again this weekend.
[This week’s events].
1, the Federal Reserve is not moving, the dot plot shows signs of hawkishness
In the early hours of Thursday morning, the Federal Reserve left the benchmark interest rate unchanged at 0%-0.25%, in line with market expectations; members unanimously agreed to the interest rate decision. The dot plot shows that the Fed is expected to maintain interest rates at current levels until 2023, in line with last December. The dot plot also shows that members appear hawkish: four members expect to raise interest rates once in 2022, compared with one member last December; seven members expect to raise rates at least once in 2023, compared with five members last December.
In terms of debt purchase guidance, the Fed FOMC statement showed that it will continue to increase its holdings of at least $80 billion of Treasuries and at least $40 billion of Home mortgage-backed securities each month until the committee makes substantial progress toward its goals of full employment and price stability.
2, the Bank of England said that it will not tighten policy until Inflation makes good progress
On Thursday night, the Bank of England announced its interest rate resolution, keeping the key interest rate at 0.1% and maintaining the total size of asset purchases unchanged at 895 billion pounds, in line with market expectations. The initial pace of purchases will likely remain near the current level, with the flexibility to slow the pace of purchases thereafter. In other words, the Bank of England will continue to inject about 4.4 billion pounds of funds into the market through bond purchases each week.
The Bank of England said that it will not tighten monetary policy until inflation makes good progress. For the rise in Treasury yields, the Bank of England said that longer-term government bond yields in developed economies have risen rapidly to levels similar to those shortly before the outbreak, which largely reflects the rise in real yields.
3, the Bank of Japan canceled 6 trillion yen ETF purchase target, expanding the range of fluctuations in government bond yields
On Friday, the Bank of Japan announced its interest rate decision. The BOJ left the benchmark interest rate unchanged at -0.1% and kept the 10-year government bond yield target unchanged near 0%, in line with market expectations. The BOJ officially removed the 6 trillion yen annual ETF purchase target, but maintained the 12 trillion yen ETF purchase ceiling, will purchase ETFs as needed, and set the 10-year Treasury yield target range between plus and minus 0.25%.
The Bank of Japan voted 8 in favor and 1 against to make a yield curve control decision, for the first Time in the statement to specify the volatility range of 10-year Treasury yields. The Bank of Japan pointed out that the excessive decline in ultra-long-term bond yields may have a negative impact, if necessary, will not hesitate to increase the strength of easing policy.
4, the United States in February “horrible data” burst cold
Tuesday night, known as the “scary data” of the United States February retail sales rate of -3%, much lower than the previous value of 5.3%, a new low since April last year.
U.S. retail sales fell in February, mainly because of the severe winter weather that affected most of the United States at the time, resulting in a temporary decline in demand. Spending may also have been curbed because the IRS tax filing window was two weeks later than usual, delaying tax refunds. An IRS report released last week showed a 32 percent year-over-year decline in tax refunds.
However, economists generally believe that after the weakness at the end of February, there will be a “decisive spending recovery” in March, so February’s “horrible data” recorded a decline, but also temporary.
5, three central banks have raised interest rates, emerging markets to raise interest rates wave to come?
Although this week the three major developed country central banks are not to tighten monetary policy signs, but emerging market countries have been sitting still. Brazil took the lead in the first shot at raising interest rates, the Central Bank of Brazil announced on the 17th, the benchmark interest rate increased by 75 basis points, from 2% to 2.75%, which is the first time since July 2015, the Central Bank of Brazil raised interest rates. Brazil’s central bank’s monetary policy committee said it will raise rates by the same amount again at its next meeting in May, unless there are significant changes in inflation forecasts or the balance of risks.
Subsequently, the Turkish central bank also raised rates sharply. Turkey’s central bank raised its key interest rate by 200 basis points to 19%, and the central bank also said it would further tighten monetary policy if necessary. Turkey’s central bank said it decided to implement a strong tightening policy ahead of schedule, taking into account the upside risk of inflation, and will maintain the tightening policy decisively for a longer period of time.
On Friday, Russia’s central bank followed suit. The Russian central bank unexpectedly raised its key interest rate to 4.5% and said it may raise rates at some future meeting. The central bank said the rapid recovery in demand and rising inflationary pressures call for a return to neutral monetary policy.
Going forward, more emerging market countries are likely to tighten monetary policy. And Nigeria and Argentina could raise rates as soon as the second quarter. Market indicators show that policy tightening in India, South Korea, Malaysia and Thailand is also expected to strengthen.
6, IEA monthly report says Crude Oil market still oversupplied, super cycle will not come
On Wednesday, the IEA released its monthly crude oil market report. The monthly report shows that a stronger economy and vaccines will increase oil demand in the second half of the year, and the organization expects global crude oil demand to rebound by 5.5 million barrels per day in 2021, with demand growing to 96.5 million barrels per day in 2021.
The oil demand gap is 4.8 million bpd in the first quarter of 2021 and 1.4 million bpd in the fourth quarter due to declining supply. Despite the improvement in demand, the oversupply of oil remains. The organization does not see an oil supercycle as supply remains sufficient.
7, it is reported that Biden considered the first significant tax increase in the United States in nearly 30 years, the U.S. version of the stamp duty is also coming?
President Joe Biden is planning to raise federal taxes sharply for the first time since 1993 to help pay for a long-term economic program that is a follow-up to his Epidemic relief bill, according to people familiar with the matter.
According to people familiar with the matter, who asked not to be identified, the following proposals are currently planned or being considered by the Biden Administration.
▪ Raising the corporate tax from 21 percent to 28 percent.
▪ Cutting tax breaks for so-called pass-through businesses (such as LLCs or partnerships).
▪ raising the individual income tax rate on incomes over $400,000.
▪ expanding the estate tax.
▪ higher capital gains taxes on individuals earning more than $1 million a year.
The overall plan has not been announced, and analysts expect it to be between $2 trillion and $4 trillion in size. No date has been set for the announcement, although the White House has said the plan would follow the signing of a new crown relief bill.
In addition, U.S. Democrats seek to impose a progressive tax on financial transactions, according to a report in the early morning hours of the 19th in foreign media. According to the Democrats’ proposal, the Wall Street Tax Act, a 0.1% transaction tax would be imposed on each stock, bond and derivative sale transaction by investors. Democrats aim to curb high-risk, high-frequency trading practices that could add $752 billion in revenue to the U.S. over a decade. Initial public stock offerings and short-term bond transactions would be exempt.
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