[Market Review].
The 10-year U.S. bond yield fell back to near 1.6%. The 10-year U.S. bond yield oscillated downward during the day, falling from 1.7% to near 1.6%.
The U.S. released CPI data for March. The 10-year U.S. bond yield moved higher and back down in the short term. Agency commentary said the U.S. CPI in March hit its biggest gain since 2012, further evidence that inflationary pressures are building as the economy recovers and demand strengthens. To some extent, the rise in inflation is welcome news for the Fed, but the Fed is not expected to become hawkish on this.
Secondly, the 10-year U.S. bond yields moved lower in the short term as the U.S. announced the discontinuation of Johnson & Johnson vaccines.
In addition, the 10-year U.S. bond yield moved further down after the amazing demand for 30-year U.S. bond auctions dispelled market concerns about the demand for ultra-long U.S. bonds. On Tuesday, the U.S. Treasury auctioned $24 billion of 30-year Treasuries. The auction results showed strong demand. The bid rate and subscription multiplier are higher than the level of the same period in March Treasury bid. This week, the U.S. Treasury has $55 billion of U.S. debt to auction, so we can keep an eye on it.
The dollar index fell back below the 92 mark. 10-year bond yields were under pressure, as was the dollar index. The dollar index hit an intraday high of 92.35, but it has now fallen back below the 92 handle.
Gold prices have recovered nearly $30 from their daily lows. Gold, on the other hand, saw a sharp rebound. Gold prices approached the $1,750 mark during the day, rallying nearly $30 from the intraday low.
Silver rose by 2%. Silver’s rally was no less impressive. Silver climbed all the way from $24.60 to near $25.40, an intra-day gain of 2 percent.
The euro rose by more than 30 points. Against the backdrop of a weaker dollar, the euro also saw a rebound against the dollar, rising a total of more than 30 points during the day and now trading near 1.1960.
The British pound took a big dive at one point. Let’s look at the British pound again. Overall, the pound was not very volatile during the day. However, the Bank of England announced that chief economist Jordan will resign after the central bank’s June Monetary Policy Committee meeting, the pound heard the news short plunged 40 points, once fell below the 1.37 mark.
U.S. oil shook up. Finally, a look at the oil market. U.S. oil is shaking up and currently running near $60.50. The morning release of API crude oil inventories beat expectations by a whopping 3.61 million barrels, boosting oil prices higher. This comes after OPEC raised its demand forecast for this year, while signs of rising oil consumption in some parts of the world continue to surface, also supporting oil prices. However, the rebound of the epidemic in India and other countries and the suspension of Johnson & Johnson vaccines in the U.S. continue to worry the market.
[Risk Warning].
Crude oil: Brewery oil is expected to continue to consolidate but still bullish in the long term
OCBC strategists said the U.S. appears to have finally ended its first quarter cold snap, with refinery utilization reaching 84%, the highest level in more than a year. This will help reduce crude oil inventories more quickly and also means that the pace of gasoline inventory reduction will be a major determinant of oil prices in the near term. In addition, epidemics continue to plague Europe, India and elsewhere. This means that the upward bull market may be temporarily derailed. The bank believes that consolidation in the $60-$65 range for Brent crude is likely to continue, but the long-term bias remains bullish.
Euro: Euro to weaken against the dollar but may outperform other G10 currencies
The Bank of Tokyo-Mitsubishi UFJ said that the 7-day average epidemic eased in Germany and France in April, and the infection in Italy eased significantly. Higher U.S. yields and an easing of the epidemic in Europe could limit the downside of the euro against the dollar if we do see a rise in dollar inflation, driving yields higher. However, the bank still expects the pair to fall but should outperform other G10 currencies.
Australian Dollar: Positive factors converge AUD expected to rise to 0.80
Canadian Imperial Bank of Commerce expects the Australian dollar to rise to 0.80 against the U.S. dollar by the end of the second quarter. first, a rebound in Australian economic activity and a sharp improvement in trade are expected to continue to support the Australian dollar’s rise. Second, although the impact of global reflation has weakened from earlier in the year, higher commodity prices driven by enthusiasm for global infrastructure spending remain an important potential support for the Australian dollar. In addition, like other major central banks, the Australian Federal Reserve has reaffirmed its accommodative stance, which will continue to support economic activity.
However, the intensification of the epidemic in many countries could be detrimental to the already optimistic global growth expectations. In this scenario, the Australian dollar, being highly speculative, is expected to increase its vulnerability.
[Key Outlook].
22:30 EIA crude oil inventories expected to decline
First, let’s take a look at EIA crude oil inventories, which fell by 3.522 million barrels after last week’s release. The EIA said that Midwest crude oil inventories fell to their lowest level since March last year, which pulled down EIA crude oil inventories. In addition, refinery utilization rates reached a one-year high, also motivated to digest U.S. domestic crude inventories.
This morning, API crude oil inventories have been released, decreasing by 3.608 million barrels, a larger than expected drop. Based on past experience, API inventory data and EIA inventory data have a relatively strong positive correlation, so EIA crude oil inventories may also decrease.
The current market expects that the EIA crude oil inventory may decrease by 2.154 million barrels for the week of April 9. If the published data exceeds expectations, oil prices may dip in the short term; if the inventory data is less than expected, oil prices are expected to strengthen.
Thursday 00:00 Powell is not expected to worry about higher inflation
Next, take a look at the upcoming speech by Fed Chairman Jerome Powell. The minutes of the Fed’s March meeting show that the Fed will maintain its ultra-loose monetary policy stance in the near term. Powell mentioned that money market rates may face downward pressure and that adjusting the excess reserve rate and overnight reverse repo rate may be the appropriate move. He said that action may be taken at regular meetings or between meetings to keep the federal funds rate in the “range” of 0% to 0.25% target.
He recently added that the Fed will support the economy until the recovery is complete and that restarting the economy too soon is the “main risk” to the recovery. He hopes that inflation in a period of “moderate” above 2%, but the Fed does not want inflation to substantially exceed 2%. He also expressed an optimistic view of the U.S. economy, saying that the economy is at an inflection point and job growth will accelerate.
On balance, Powell may reiterate that stronger inflation is only temporary and that the Fed will support the economy until it fully recovers. In addition, investors need to pay close attention to his statement on bond purchases. If it is said that he re-emphasized that he will taper the bond purchases at the right time, the dollar index is expected to gain support.
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