The “hawkish” Federal Reserve greatly boosted the dollar. The Federal Reserve interest rate resolution that investors have been waiting for finally came to a close this morning. The Fed announced that the benchmark interest rate will remain unchanged at 0%-0.25%, raising the overnight reverse repo rate and the excess reserve rate.
The dot plot shows that the first rate hike was brought forward. By the end of 2023, the Fed will raise interest rates twice. In addition, the Fed raised this year’s GDP growth expectations and PCE inflation expectations for this year and next three years.
Fed Chairman Jerome Powell mentioned in a press conference that the rate hike discussion is not the focus of this resolution and is premature, and that if progress continues, a tapering plan will be considered in the next meeting. In addition, he acknowledged that inflation may continue to be high in the coming months before easing, arguing that inflation levels will be higher by 2023.
The interest rate resolution surprised with hawkish signals and the 10-year U.S. bond yield surged wildly above 1.5%, while the U.S. dollar index was no slouch, rising nearly 100 points in the short term and surging straight to the 91.5 mark.
Gold plunged $60. By contrast, precious metals as well as non-U.S. currencies were in mourning. Gold fell from $1860 to $1800 and is now trading near $1820.
Silver instantly fell through $27. Like gold, silver also instantly fell through the $27 mark, falling as low as $26.58, with the decline once extending to 4%.
The euro plunged more than 100 points. In non-U.S. currencies, also affected by the Fed’s interest rate resolution, the euro plunged more than 130 points against the dollar, currently trading near 1.20.
The British pound lost the 1.40 handle. The British pound, earlier, the British pound against the U.S. dollar well a small recovery, up to 1.4132. However, by the impact of the Fed’s interest rate resolution, the currency pair not only retracted the previous gains, but also lost the 1.40 mark, hitting a new low since May 10.
U.S. oil rose and then fell. Finally, a look at the oil market. The EIA crude oil inventory released yesterday evening recorded a big drop of 7.355 million barrels, which once helped push U.S. oil to $72.95 per barrel, renewing a 3-year high, but oil prices turned lower after the Fed’s interest rate resolution was announced. By the end of the day, U.S. oil closed down 1.43% at $71.65 a barrel.
Although the Fed resolution set back oil prices, but there are still many factors that support higher oil prices, in addition to the U.S. crude oil inventories are decreasing, the global economy is steadily reopening, China’s refineries single-day crude oil processing record, the epidemic once ravaged India oil demand rebound, Europe’s refineries are increasing crude oil processing capacity and other factors, also boosted oil prices.
Gold prices have short-term pullback risk, but does not change the long-term bullish view
Some analysts say that if gold continues to fall below $1,800, it will face a more substantial correction, possibly to $1,673. On the contrary, if gold prices do not continue to fall but go higher, hitting $2000 by the end of the year may not be a problem.
When gold’s momentum turns up, the gold price is almost unstoppable. For example, gold rallied below $1,500 last March and broke through to a record high of $2,000 five months later. Overall, gold prices have a short-term risk of pullback, but does not change the long-term bullish view.
Inventories may accelerate decline UBS raised oil price expectations
UBS said crude oil supply growth is still lagging behind demand growth, and inventories are likely to fall at a faster pace, and oil prices are expected to rise in the next three months, so it raised Brent and WTI crude oil price expectations by $3 a barrel, with Brent crude rising to $78 a barrel in September and WTI crude hitting $75 a barrel. However, the bank also pointed out that OPEC + and Iran may increase supply in the second half of the year, oil prices are expected to “moderate fall” before the end of the year.
New Zealand economy orderly recovery New Zealand dollar short-term concern 0.7180
DAILYFX analysts pointed out that after the Fed’s interest rate resolution, U.S. bond yields and the U.S. dollar index soared, including the New Zealand dollar, non-U.S. currencies generally under pressure. However, the subsequent release of New Zealand’s first quarter GDP recorded an annual rate of 2.4%, much higher than the expected 0.9%, and the quarterly rate also recorded a good performance. the GDP rise pushed the New Zealand dollar to recover some of its lost ground.
Overall, the New Zealand dollar will be supported as vaccinations continue to increase in the coming months and optimism related to tourism improves. The NZDUSD can watch the 100-day moving average, or 0.7180, in the short term.
TBD OPEC may emphasize that oil market will continue to tighten
First of all, let’s focus on the meeting that will be held by OPEC’s Joint Technical Committee. Earlier this month, OPEC’s monthly report projected global crude oil demand growth of 5.95 million barrels per day in 2021, with a strong recovery in oil demand in the second half of the year. During the epidemic, global oil stocks were heavily depleted. OPEC+ expects a severe tightening of the global oil market and is now partially restoring production that was cut last year because of the outbreak. According to a report by the Joint Technical Committee last month, OPEC+ producers still have a lot of spare capacity when they complete their current production increase plans, and there is plenty of room to increase production later this year.
In the wake of successive oil busts, some oil companies have scaled back their exploration and extraction budgets to save cash and avoid a new supply glut. Many, including the Saudi energy minister, are concerned that excessive capital spending cuts could lead to a crude supply crunch amid a rebound in demand. But OPEC+ will not change its strategy easily, but follow its current plan to increase production and gradually increase crude oil supply.
20:30 US Initial Claims expected to remain low
Next, let’s take a look at the initial jobless claims that will be released in the US. In recent weeks, the number of initial claims released in the United States has continued to move downward, with last week’s release coming in at 376,000. Agencies commented that initial jobless claims fell for the sixth consecutive week, consistent with further improvement in the labor market and strong economic growth. Layoffs have been significantly reduced since the beginning of the year as more Americans have been vaccinated with the new crown and companies expand their workforce to meet demand. Hiring is expected to continue to increase in the coming months as remaining restrictions are lifted and more people plan summer travel and leisure.
Currently, the market expects the number of initial jobless claims in the U.S. to 359,000 for the week of June 12. If the published value is much higher than expected, the dollar index may come under pressure; conversely, if the published value is less than expected, the dollar index may strengthen.
The market generally expects that the number of initial jobless claims will be further reduced, which will have some support for the dollar index.