U.S. bond yields move higher, gold falls sharply

[Market Review].

The US Dollar Index maintained its weakness. The dollar index fell 0.4% during the week. Recent U.S. economic data releases remained positive, with first quarter GDP growing at an annualized quarterly rate of 6.4%, higher than the previous value and expectations. In addition, initial jobless claims were recorded at 553,000, which was also lower than the previous value. In addition, personal consumption pointed out that the consumer confidence index also recorded a good performance. Nevertheless, the Federal Reserve still believes that the current economic environment is not enough to allow the easing policy to exit. In the early morning of Thursday’s interest rate resolution, the Federal Reserve, as expected to keep interest rates unchanged, and maintain the monthly bond purchase scale unchanged. This prompted the dollar index was once under significant pressure, even the U.S. bond yields higher can not regain the trend. Looking ahead, we still have to continue to pay attention to the U.S. President Joe Biden’s long-term stimulus plan. This week, Biden disclosed details about the family plan. The plan is said to include about $1 trillion in investments and $800 billion in tax cuts for American families and working people. This will cover areas such as education, childcare, paid leave and sick leave. It is reported that part of the funding for this plan will come from taxes on the wealthiest Americans. Overall, the scale of both the infrastructure plan and the family plan, as well as the tax reform plan, remain highly controversial, and we can continue to wait patiently for a while.

Gold is back near the 1770 mark. Next to focus on gold, gold prices this week mainly traded in the $1756-1790 range. The Federal Reserve continues to release dovish signals, depressing the dollar and supporting gold. However, the beautiful performance of U.S. economic data, as well as the climb in U.S. bond yields, limited gold’s gains.

Silver fell below $26 at one point. The trend of silver is similar to that of gold. Previously, silver prices rose to $26.45 near, but then gave back the gains, hitting a low of $25.69, and is now running at $26 near.

The euro is shaking up. The euro continued to rise against the dollar this week against the backdrop of a weaker dollar. Analysts continue to bet that the European economy will gradually recover from the new crown crisis. Similar to the Federal Reserve, European Central Bank President Lagarde said that economic data show signs of improvement in the European economy, but it is still too early to say whether the most serious economic impact of the new crown crisis has ended. The European economy still needs monetary policy and fiscal policy stimulus. European Commission President von der Leyen also said that the EU will implement a 750 billion euro economic recovery plan.

The British pound stepped on the 1.39 handle. The British pound, which is also a European currency, also gained a handful of points this week. The weak performance of the U.S. dollar, coupled with the fact that the U.K. continues to move forward with the vaccination process, has supported the pound.

U.S. oil climbed all the way up. Finally, let’s look at the oil market. U.S. oil has shaken higher this week, rising from $60 at the beginning of the week to near $65. Expectations of increased demand supported oil prices, despite the current surge in new crown cases in countries like India, Brazil and Japan. Major U.S. cities are nearing the end of their anti-epidemic lockdown, with New York City preparing to fully reopen on July 1 and Chicago fully easing restrictions across all industries. In addition, fuel sales in Europe and the U.K. are nearing last summer’s levels, and travel on the May Day holiday in China may reach a record high, providing near-term momentum for oil prices. Nonetheless, we need to keep an eye on the U.S.-Iraq negotiations to prevent a negative impact from increased supply.

Risk Warning

Crude oil: Oil demand is expected to jump, and the bunker oil fears to rise to $80

India’s new crown pneumonia cases surge, to a certain extent, overshadowed the demand outlook. However, Goldman Sachs said that demand will rebound sharply this year and Brent crude will touch $80 a barrel in the summer. By this fall, excess oil inventories will return to normal. The strong recovery in demand will force OPEC+ to increase production by another 2 million barrels per day in the third quarter.

Euro: Fed continues to maintain easing Euro expected to rise to 1.22-1.23

The Dutch International Group believes that the euro will rise to 1.22-1.23 against the dollar as the Fed is happy to see further weakness in the dollar, coupled with Europe or welcome new signs of recovery. on the one hand, the Fed is extending the period of severely negative real interest rates, and encourage investors to increase the foreign exchange hedging ratio of holding U.S. assets; on the other hand, the Fed continues to maintain easing, while countries such as Canada has begun to announced a tapering of easing, which narrowed the dollar’s advantage.

British pound: the pound down space is expected to be limited focus on key resistance 1.4018

Commerzbank technical analysis, the pound against the dollar held steady above the 20-day moving average of 1.3845, the near-term downside is expected to be limited. As long as it does not break below the uptrend line at 1.3707, the pair will always remain in an uptrend. We can keep an eye on the key resistance at 1.4018 and once it is broken, we can continue to look up at 1.4238 and 1.4245.

[Key Outlook].

17:00 Eurozone GDP fears continued contraction

European GDP continued to shrink in the four quarters last year, recording -5.1% in the fourth quarter. Analysts believe that the eurozone’s smaller GDP decline in the fourth quarter of 2020 suggests that the EU countries’ strict preventive measures have had an effect. ECB chief economist Ryan expects that eurozone GDP will shrink slightly in the first quarter. By May, the economy will have rebounded.

Currently, the market expects the eurozone’s first quarter GDP annualized preliminary value of -2%, if the published value is better than expected, or good for the euro; conversely, it is negative for the euro.

At the same time, the euro zone will be released in April CPI data and the March unemployment rate, investors should consider the impact of these data on the euro.

20:30 U.S. March PCE data or bright performance

In February this year, PCE data recorded 1.4%. This indicates that U.S. inflation is moderate for the time being. According to the stimulus bill passed in the US at the end of last year, most Americans will receive a cash check of $600, and personal income surged 10.1% in January due to this effect, which led to the plunge in February data. And according to Biden’s latest round of stimulus plan, most Americans will receive a $1,400 cash check, which also means that personal income data in March will increase significantly.

It should be noted that the February inflation data will only ease temporary concerns, and with the economic recovery accelerating and the low base effect of last year’s epidemic, U.S. inflation will move rapidly higher in the future, when the market will face a real test. And recently, the U.S. released a series of bright data performance, which means that inflation data may go higher.

Currently, the market expects the U.S. core PCE price index for March at an annual rate of 1.8%, if the published value is better than expected, or good for the dollar; if the published value is less than expected, or negative for the dollar.

At the same time, we should also pay attention to the monthly rate of PCE price index published at the same time, the market is expected to be 0.3%. You need to consider the impact of these two sets of data on the dollar index.