Fed resolution with horrible data, gold is on the eve of a big explosion?

This week after the Dragon Boat Festival, the market has a lot to see, the Federal Reserve, the Bank of Japan, the Swiss central bank and other interest rate resolutions will be announced, the outside world is concerned about whether inflationary pressure will change the dovish position within the Fed. At the same time, the United States will publish the monthly retail sales rate, producer price index PPI and other key data. If the data collectively exceed expectations and continue to challenge the stage of new highs, the central bank will not act in advance, this week is an important observation window. In addition, the U.S.-European summit will be held, and U.S. President Joe Biden will meet with Russian President Vladimir Putin.

① Fed resolution coming up

This week, the Federal Reserve, the Bank of Japan and the Swiss central bank will announce interest rate resolutions. Among them, the most attention or the Federal Reserve.

In the early hours of Thursday morning, the Fed FOMC will announce its interest rate resolution, policy statement and economic expectations, and Fed Chairman Jerome Powell will hold a press conference. The market is expected to see no big moves from the Fed, but it may adjust its inflation forecasts.

Last week’s release of the U.S. CPI rose 5% year-on-year in May, a record high since August 2008, and the Fed will begin discussing QE tapering at this week’s meeting is the focus of the market. But CPI after the release of the U.S. stocks not down but up, indicating that the market believes that inflation is temporary, and the current level of inflation is not enough to make the Fed change monetary policy. This week is the time to verify whether the market speculation is correct.

Also, the Fed’s reverse repo instrument usage hit a record high for the fifth consecutive day last week and the Fed may respond this week, but there seems to be a debate on whether it needs to raise the reserve rate or the overnight reverse repo rate at the June rate resolution.

Investors will also be watching the latest quarterly economic outlook and dot plot to gauge the FOMC’s views on the economic outlook, labor market, inflation expectations and the direction of interest rates.

The market is currently waiting for a clear signal from the Fed, as dollar volatility has fallen to its lowest level in over a year. In the bond market, with the 10-year U.S. bond yields fell further to the bottom of the past few months finishing range, U.S. bond shorts have now undoubtedly reached a dangerous position of retreat. And considering the Federal Reserve resolution and other risk events will come one after another, the bond market is expected to start the battle of life and death.

OANDA analysts Griffiths (Sophie Griffiths) on the gold price outlook is cautiously optimistic, he believes that gold initially fell due to soaring U.S. inflation, but from the U.S. Treasury yields to find support in the retreat. While inflation is currently high, gold remains one of the key anti-inflation options as interest rates are expected to remain limited.

OANDA senior market analyst Edward Moya, on the other hand, said that this week we will see a slightly less dovish central bank and start discussing tapering, a short term view that puts pressure on gold prices and gives investors a reason to sell short term. He believes that gold prices will remain volatile until they reach $1,950, with gold buyers emerging at the $1,870 level, and that gold will eventually rise to $1,950, when new buyers will push the price up to $2,000.

②Putin and Biden meet face-to-face

On Monday, U.S. President Joe Biden visited Brussels for the NATO summit. On Wednesday, Russian President Vladimir Putin held a summit with U.S. President Joe Biden.

This is the first time Biden met with Putin since he came to power. Compared to former President Trump, Biden’s stance on Russia is much tougher. Before that, Russia made a lot of moves. Outside analysis suggests that this is Russia’s way of raising its asking price. Reuters reports that the White House has also disclosed some of the topics Biden will mention in the meeting, including ransomware attacks, the Ukraine issue, the imprisonment of opposition figure Navalny and other elements that have a negative impact on U.S.-Russian relations.

If an agreement is reached at this meeting, the balance of the world will change. However, experts believe that the meeting between the U.S. and Russian leaders will not produce any breakthrough results and it will be difficult to “break the ice” in U.S.-Russian relations in a short period of time.

③U.S. retail sales and other heavyweight data coming

In terms of data, at 20:30 on Tuesday, the U.S. will release the monthly retail sales rate in May, the monthly PPI rate in May, and the New York Fed manufacturing index in June.

The performance of the monthly retail sales rate in May will reflect the performance of economic momentum, as the U.S. government’s fiscal stimulus effect gradually released, in April after a flat ringgit, institutions expect retail sales last month will be a 0.8% decline in ringgit.

At the same time, as a leading indicator of price direction, the U.S. producer price index PPI last month or to continue the upward pattern, is expected to grow 6.3% year-on-year and 0.6% YoY, bringing further pressure on the cost of production enterprises.

In addition, the May new housing starts, the monthly rate of building permits, the number of initial jobless claims last week, the Philadelphia Fed manufacturing index in June and other data released during this week are also worth watching.

④Continued focus on U.S. infrastructure bill negotiations

Negotiations on President Biden’s infrastructure plan continued to make no substantive progress last week, with a bipartisan Senate panel of another group of 10 senators reaching agreement on a $1.2 trillion, eight-year infrastructure spending package after attempts to reach agreement earlier in the week.

With Congress back in session, related negotiations will continue in the coming weeks, and it is thought that if agreement is still not reached in the end, Democrats could still use their seat advantage in Congress to force a bill through the reconciliation process.

⑤ Continued Focus on Iran Nuclear Talks

The outlook for the Iranian nuclear talks has raised expectations after the U.S. announced the lifting of sanctions on some officials and companies. The sixth round of talks of the Joint Commission on the Comprehensive Iran Nuclear Agreement was held in Vienna on 12 local time.

The Iranian side said the U.S. must first lift sanctions against Iran, but the talks are currently facing a complex situation because of the many technical, legal and political issues surrounding the U.S. return to the Iran nuclear deal and the complexity of verification of U.S. actions to lift sanctions.

The International Energy Agency (IEA) said in its monthly report that Iranian crude oil production could rise to about 3.15 million barrels per day by the end of this year as talks to restart the Iran nuclear deal continue. If a nuclear deal is reached, it could take another month for U.S. sanctions to be lifted, causing output and exports to move higher in the third quarter.

Iran could regain market share with competitive prices and will clear more than 75 million barrels of crude and condensate stocks stored on tankers as soon as possible. Iran’s oil exports have averaged 660,000 bpd this year, and sustainable crude capacity could rise to 3.8 million bpd by mid-2022.

Position data shows speculators remain bullish on the outlook for oil prices. CFTC data shows that the net speculative long position in WTI crude oil futures increased by 27,949 lots to 424,476 lots in the week ended June 8. Data from the Intercontinental Exchange (ICE) showed that the speculative net long position in Brent crude oil futures increased by 23,463 to 290,745 lots last week.