[Market Review].
Turkish lira plunged. On Monday, the US dollar jumped high against the Turkish lira, jumping from 7.0 to 8.0, and then retraced, but is still hovering around the high of 7.8. Analysts believe that the main reason for this plunge in the Turkish lira is the dismissal of Abar, the former governor of Turkey’s central bank. Abar’s dismissal is believed to be related to the recent interest rate hike by the Turkish central bank. In order to curb Inflation, Turkey’s central bank announced on the 18th to raise interest rates by 200 basis points to 19%, far exceeding market expectations. Since Abar took office last November, in order to fight inflation, the Turkish central bank has repeatedly and sharply raised interest rates, and the benchmark interest rate has been raised by a total of 875 basis points. Turkey’s decision has sparked fears of a reversal of recent rate hikes and has eroded the credibility of the Turkish central bank. However, analysts at the financial website Forexlive noted that the impact of the plunge in the Turkish lira was limited. Asian markets, which lack liquidity, reacted subconsciously in early trading, with funds flowing to other safe-haven assets such as the dollar and yen bonds.
The yield on the U.S. 10-year Treasury note fell to near 1.7%. The Turkish lira fell hard, triggering a return to safe-haven sentiment. The U.S. 10-year Treasury yield saw a decline and is now down to near 1.7%. Currently, we need to keep an eye on the auction of U.S. Treasuries. According to the schedule, the U.S. Treasury will bid for $60 billion of two-year Treasuries on Tuesday, $61 billion of five-year Treasuries on Wednesday and $62 billion of seven-year Treasuries on Thursday this week. The total size of the three auctions is up to more than 180 billion U.S. dollars, investors need to pay close attention to the changes in the bid ratio.
The dollar index retreated. Next, let’s focus on the dollar index. Earlier, the dollar index was once sought after by safe-haven funds and rose. However, the plunge in U.S. bond yields triggered the U.S. index to retreat in the European session.
Gold broke below $1740. Gold was under slight pressure during the day. Gold prices traded mostly around $1740 for most of the day. By this morning, the decline had the potential to extend further and has now broken below the $1740 mark.
The New Zealand dollar is diving this morning. Likewise, the New Zealand dollar is seeing declines this morning. On Tuesday, local Time, the New Zealand government introduced a package of policies aimed at tackling high housing prices. Following the news, the New Zealand dollar fell in response. The New Zealand dollar fell below its 100-day moving average against the U.S. dollar for the first time since November.
Bitcoin dipped below $54,000 at one point. Let’s look at bitcoin again. Bitcoin also saw declines, at one point dipping below $54,000. On Monday, Federal Reserve Chairman Jerome Powell and other central bankers attended a video conference at the Bank for International Settlements. The theme of the conference was “Global Central Bank Innovation in the Digital Age”. Powell reiterated the Fed’s “slow” stance on advancing digital currencies. Powell also continued his previous argument against cryptocurrencies, saying that crypto assets are highly volatile and speculative, and that global stablecoins are not yet regulated and cannot be used as a substitute for the U.S. dollar. Powell’s speech hit bitcoin.
The euro gained more than 50 points during the day. In the euro, the dollar came under pressure during the day, while the EURUSD saw a rally, with the pair gaining more than 50 pips during the day.
U.S. oil moved sideways and oscillated. Finally, take a look at the oil market. U.S. oil has been oscillating sideways during the day mainly around $60-61. Hopes for a pickup in demand later this year helped curb last week’s broad-based sell-off, but oil prices remain under pressure as a new blockade imposed in Europe reduces the likelihood of a quick recovery.
[Risk Warning].
Euro: Third wave of Epidemic coming European pound concerns 0.8540
U.S. Commodity Futures Trading Commission data show that speculators reduced their net long position in the pound against the dollar in the week ended March 16. While the market as a whole remains bearish on the pound, net long positions have shrunk over the past two weeks. The pace of vaccination in the UK is among the highest in the world, making analysts bullish on the UK’s performance in lifting the anti-epidemic embargo to restart the economy. The situation in Europe, on the other hand, is not bullish. ING strategists said in a report that it may be difficult for the pound to make much progress against the dollar as Europe deals with the third wave of the epidemic, but the support of the euro against the pound at 0.8540 may remain under pressure.
JPY: Yen still under pressure US-Japan fears return to 109
Turkey’s president removed the central bank governor, triggering a chain reaction in emerging market currency markets, so that the safe-haven yen again because of the influx of funds to get buy demand. However, this did not change the big picture of the market. Investors are still assessing the negative impact of Japan’s Tokyo Olympics confirmation that it will not receive visitors from outside the country, which has put pressure on the yen. Some analysts say that the dollar may still return to the 109 mark against the yen in the aftermath, as the market watches the global epidemic and the next move in the economy. Earlier rumors that the U.S. government will come out with greater infrastructure stimulus measures. Once that happens, U.S. bond yields will continue to rise and drive the dollar to continue to strengthen against a basket of non-U.S. currencies.
Palladium: Tight supply and demand situation, palladium fears to rise to 3000
TD Securities said it expects tighter supply and demand conditions for platinum and palladium after Russia’s Norilsk company recently reduced its production schedule due to mine problems. TD Securities expects the palladium market to record huge shortages of 1.16 million ounces and 600,000 ounces this year and next. Palladium could again challenge the high of $2,883 per ounce set in March 2020 and possibly touch $3,000 per ounce.
[Key Outlook].
15:00 UK unemployment rate expected to rise
First, let’s take a look at the UK’s ILO unemployment rate. Unemployment figures released in recent months have steadily risen, with last month’s release registering 5.1%, a new high since March 2016. Analysts expect the number of unemployed in the U.K. to surge when the government’s mandatory leave program, which pays most of the wages to millions of private sector workers, ends at the end of April as scheduled.
Currently, the market expects the UK January three-month ILO unemployment rate of 5.2%, if the published value is greater than expected, or negative pound; conversely, it is positive pound.
In addition, the UK unemployment rate in February, February unemployment claims will be announced at the same time.
19:50 Bailey is difficult to have new tricks
Later, Bank of England Governor Tony Blair will give a speech. In the last week, the Bank of England kept interest rates unchanged, kept the bond purchase target unchanged, and said it would not tighten monetary policy until inflation made good progress; at the same time, it said the economic outlook remained uncertain, inflation expectations remained stable, and action would be taken if the inflation outlook weakened. The Bank of England’s resolution last week and the previous resolution is not much different, and did not exceed market expectations.
Earlier, Bailey said that the outlook is positive, but to remain cautious about reality. He expects inflation to pick up to 2% in the coming months, but not to rise to 4-5%. He also said that the tools to recover the economy have not been exhausted and that it is right to leave negative interest rates in the toolbox.
Based on this, we believe that Bailey is likely to emphasize that inflation will be relatively stable and that there are still tools to help the UK economy recover, but is unlikely to use negative interest rates.
Overall his comments will not change much and the focus for now will be on the UK’s vaccination situation, which will have an important impact on the economic recovery.
Wednesday 00:00 Powell expected to emphasize commitment to economic recovery
Early tomorrow morning, Federal Reserve Chairman Jerome Powell will testify before the House Financial Services Committee on the New Coronation Assistance, Relief, and Economic Security Act. Last week, the Fed left its benchmark interest rate unchanged at 0%-0.25% and is expected to keep rates at current levels until 2023, which is consistent with last December’s dot plot; maintain the current pace of asset purchases until substantial progress is made toward full employment and price stability goals. The Fed also raised its GDP growth expectations for this year and next, and lowered its GDP growth expectations for 2023.
And his published speech showed that he will again refer to the Fed’s policy, which is not much different from the last resolution. In addition, he said that the U.S. economy is recovering faster than expected, the Fed’s support will continue, and the Fed is committed to using all tools to support the economy. The Fed released more than $2 trillion to small businesses, cities and states, and the Fed has returned most of the CARES Act funds. Other emergency lending tools will end soon, except for the paycheck guarantee program.
Taken together, Powell will emphasize keeping interest rates low, maintaining the size of bond purchases, and will aim to use all tools to support the economy.
In addition he will also reiterate that stronger inflation is only temporary. For rate hike forecasts, testimony said there is a clear divergence between the forecasts of Fed officials and market participants, with the vast majority of officials believing that interest rates will not be raised until 2024 at the earliest, while investors estimate that the Fed will raise rates several times before the end of 2023. Powell may explain this discrepancy.
Wednesday 04:30 API Crude Oil inventories may decrease
Finally, come to focus on API crude oil inventories. Last week, the API reported a 1 million barrel decrease in U.S. crude oil inventories. The EIA crude oil inventories were then released with an increase of 2.396 million barrels.
By the end of the week, the market expects that the US API crude oil inventories may decrease by 908,000 barrels for the week ending March 19. If the published value is larger than expected, oil prices may come under pressure; conversely, oil prices may rise.
However, there is still optimism about U.S. oil consumption as the Biden administration rolls out a series of stimulus measures. Hopes for a rebound in demand later this year curbed last week’s broad-based sell-off in crude, but oil prices remain under pressure as a new round of embargoes imposed in Europe reduces the likelihood of a quick recovery. Nearly a third of the French began a month-long embargo, and Germany plans to extend it for a fifth month, according to a draft proposal.
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