U.S. CPI once again “explosive” gold bulls to save the day

[Market Review].

The US Dollar Index maintained its declining trend. The US Dollar Index basically hovered around the 90 mark this week. On Wednesday evening, it fell to a weekly low of 89.84 because the U.S. Treasury bid $38 billion of 10-year U.S. Treasuries, which showed strong demand.

However, by Thursday evening, the dollar index broke out of its consolidation range and touched 90.33 upward, but then quickly fell back to near the 90 mark.

The U.S. unadjusted CPI recorded an annual rate of 5% in May, a new high since August 2008, and the unadjusted core CPI recorded an annual rate of 3.8%, a new high since 1992. Investors are still waiting to see if there are signs that the price rise may last longer than expected, which could challenge the Fed’s insistence that inflationary pressures are temporary.

Next week’s Federal Reserve interest rate resolution will be a new focus of attention. It is currently believed that the Fed will raise interest rates between April and May 2023. The recent spike in the use of reverse repos is seen as a precursor to the Fed tapering its bond purchases.

However, Silicon Valley Bank’s senior foreign exchange trader said the overall trend for the dollar is somewhat weak, and that not only is the U.S. economy currently growing strongly, but many economies are recovering. When investors remain optimistic about overall global growth, it usually creates a risk-taking mentality, which will benefit other currencies, not the dollar.

U.S. lawmakers from both parties have introduced a no-tax increase version of the infrastructure plan. As for Biden’s economic plan, the latest news says a bipartisan group of U.S. senators said an agreement has been reached on an infrastructure plan that would spend $579 billion in new money and $1.2 trillion over eight years. The plan will be paid for in full, but the means will not include tax increases. The U.S. infrastructure plan negotiations are struggling, so we can wait patiently for some follow-up developments.

Gold is hovering around $1,900. Next, let’s focus on gold. Gold prices have mainly fluctuated in the $1870-1900 range this week. After the release of the US CPI data, gold fell to $1869.66 per ounce, but then quickly recovered the lost ground and returned to the $1899 neighborhood.

Silver was range-bound. In silver, silver prices were also largely in a narrow range this week, trading mainly in the $27.4-$28 range during the week.

The ECB’s dovish stance hurt the euro bulls. In non-US currencies, the EURUSD hovered around 1.2170 for most of the week, touching a high of 1.2218.

Yesterday evening, the ECB announced its interest rate resolution, keeping the three key interest rates unchanged, in line with market expectations. The ECB confirmed that it will significantly accelerate the pace of purchases under its emergency anti-epidemic bond purchase program during the quarter, which will last until at least the end of March 2022. In the subsequent briefing, ECB President Lagarde mentioned that there will be discussions on exiting the emergency anti-borrowing program “in due course”, and that it is still too early to do so. After the announcement of the interest rate resolution, the euro fell against the dollar in the short term.

The British pound generally remained sideways. Let’s look at the British pound again. GBPUSD hit a low of 1.4073 this week, but finally returned to its early week position around 1.4170. Concerns over the delayed easing of the embargo and the failure of the UK and the EU to agree on a post-Brexit solution for trade in Northern Ireland weighed on the pound. However, the pound did not have much room to fall against the dollar this week against the backdrop of the dollar maintaining its declining fortunes.

The withdrawal of U.S. sanctions against Iranian executives weighed on oil prices. Finally, take a look at the oil market. U.S. oil traded in the range of $68.4-$70.6 this week.

API and EIA crude inventories recorded big decreases, although gasoline and other refined products inventories increased sharply, which overshadowed the prospect of a strong rebound in demand during the summer driving season.

On the U.S.-Iran negotiations, Secretary of State Blinken said hundreds of U.S. sanctions against Tehran will remain in place even if the U.S. and Iran reach a deal. This could mean more Iranian oil supplies will not return to the market anytime soon. The news boosted oil prices considerably.

However, by Thursday, foreign media reported that the U.S. government had lifted sanctions on some former Iranian oil industry managers. Oil prices were spooked after the news was released and briefly plunged, with U.S. oil falling more than $1 in short term accumulation.

In general, this week’s mixed news, and no major positive, oil prices thus narrowly oscillating.

Risk Warning

The U.S. dollar index is under pressure and is expected to fall further to 87.3

Westpac believes that as central banks still have a long way to go before they can take significant action, the peak of the U.S. recovery will weigh on the U.S. dollar index in the short term, which is expected to fall further to 87.3 in the second half of 2022, after which the U.S. index is expected to stabilize and begin to move slightly higher with the implementation of U.S. monetary tightening policies. From now until September 2022, the EURUSD will rise from around 1.2170 to 1.27. In addition, the pound has outperformed the euro in recent months and further gains in the pound are likely to be modest, with the underlying expectation being that the pound will rise to 1.44 against the dollar.

Sterling short-term neutral slightly bearish focus on resistance at 1.4250

Commerzbank technical analysis, the pound against the dollar short-term outlook is neutral slightly short, only to close above 1.4250 to regain upward momentum, after the breakthrough will point to the 2018 high of 1.4377. if blocked at 1.4250, is expected to test again downward 1.4090-1.4080, after breaking down again focus on nearby support 1.4018-1.40, thereafter Look down at 1.3976 and 1.3908 in that order.

U.S. and Canada fear continued decline in the second half of the year to see below 1.20

According to the Dutch International Group, although the June interest rate resolution of the CBC on Wednesday did not provide any surprises, the CBC will still scale back its weekly asset purchases to C$2 billion from July and end its quantitative easing program around the end of the year, given the improved outlook for the Canadian economy in the second half of this year. As a result, the bank expects the CBC to start raising interest rates in the fourth quarter of next year, with the policy rate ending next year at 0.5% and at 1.25% by the end of 2023. The CBC remains among the hardliners in the G-10, which will continue to provide support for the Canadian dollar. USD/CAD will trade below 1.20 in the second half of this year and touch 1.16 in the fourth quarter of this year.

[Key Outlook].

14:00 UK GDP expected to rebound strongly

First of all, let’s pay attention to the UK will release the three-month GDP monthly rate in April. From January to March this year, UK GDP recorded a negative value for all three months, with March’s figure at -1.5%. The financial website Forexlive commented that the March results are encouraging, despite the difficulties still faced this quarter. Considering the UK’s success in vaccine rollout, the economy should be better in April after this.

Currently, the market expects the UK’s three-month GDP rate to be 1.5% in April. If the published value is lower than expected, it may be negative for the pound; on the contrary, it may be positive for the pound.

In addition, the monthly rate of British manufacturing output and industrial output and other data will be released at the same time, you should also take into account.

16:00 IEA may raise the growth rate of crude oil demand

Next, let’s take a look at the IEA’s upcoming crude oil report. Last month the IEA slightly lowered its forecast for crude oil demand growth this year, saying that the decline in Indian demand will have little impact on the global oil market and that the recovery in crude oil demand will outpace supply growth.

Yesterday, OPEC’s monthly report projected an expected global crude oil demand growth rate of 5.95 million barrels per day in 2021, with a strong recovery in oil demand in the second half of the year.

OPEC+ expects severe tightness in the global oil market after global oil stocks were heavily depleted during the outbreak and is now partially restoring production that was cut last year because of the outbreak.

According to the Joint Technical Committee report, OPEC+ producers still have a large amount of spare capacity after completing their current production increase plans, and there is still plenty of room to increase production later in the year.

On balance we believe that the IEA’s monthly report is likely to revise upward the growth rate of global crude oil demand and expect a rapid reduction in crude oil inventories.

In addition, some energy consultants say OPEC+ could continue to increase production after July as global demand recovers to reach 98 million bpd by year-end, compared to about 94 million bpd currently. If OPEC+ does not act, or if Iranian oil supplies do not return to the market, then there could be a considerable decline in oil inventories.

Investors also need to keep an eye on the U.S.-Iran negotiations. Once the restrictions on Iran are lifted, most of Iran’s production is expected to resume within a month and fully recover within three months. However, there are still obstacles to the return of Iranian oil to the market. On Tuesday, U.S. Secretary of State Blinken said hundreds of sanctions against Iran will remain in place even if the Iran nuclear deal is restarted.