The U.S. dollar index extended its declining trend. The U.S. Dollar Index extended its downward trend last week. After a relatively sharp drop last Monday, the U.S. index then oscillated in the 90.8-91.40 range. Fed Chairman Jerome Powell’s accommodative tone put pressure on the dollar. Powell said, due to the strong economic recovery, the United States this year may appear “slightly higher” inflation, but the Fed is committed to controlling inflation within a certain range. In addition, the U.S. Treasury bonds marked good demand, investors sold dollars to buy U.S. bonds, causing short-term pressure on the dollar. The U.S. Treasury conducted a tender sale of 20-year Treasury bonds last week, with a yield of 2.144% and a bid multiple of 2.42.
However, the recent strong performance of the U.S. economy has limited the dollar’s decline. This follows a 9.8% monthly increase in U.S. retail sales in March, the best performance since May last year. The job market is also picking up, with initial jobless claims falling to 576,000, a record low since last year’s epidemic, according to the U.S. Labor Department. The Federal Reserve’s Brown Book noted that jobs in manufacturing, construction, leisure and hospitality were growing fastest. Many companies said that hiring is more challenging.
Gold prices edged higher. Moving on to gold, gold prices maintained a shaky trend last week. Market concerns about the outbreak dominated the supporting factors for gold prices. In recent times, countries such as India and Japan have again been hit by an increase in cases, and global financial markets are again worried about whether the new crown epidemic has resurfaced. In addition, the U.S. bond yields fall back to adjust in the short term, also give gold prices support. However, there are still many factors working against gold prices, such as the recent strong performance of the U.S. economy and U.S. stocks, the expectation of the Biden-based construction bill, and the expectation of higher U.S. 10-year Treasury yields in the long term.
Silver rangebound. Silver moved similarly to gold, previously moving higher to near $26.60 before giving back some of its gains and falling back to near $26 before finally closing slightly higher.
The euro oscillated and climbed. In non-U.S. currencies. The euro rose more than 140 points against the dollar last week. The euro was supported by a well-controlled outbreak in Europe. Reports indicate that the EU’s new crown vaccination is finally seeing a long-awaited spurt, increasing hopes that the epidemic is under control in Europe and that the economy will reopen sooner than expected. Although more optimistic about the economic outlook, but the European Central Bank is still in no hurry to change the easing tone, or maintain monetary policy unchanged.
The British pound surged higher and retreated. Let’s look at the British pound again. The British pound was once strong against the U.S. dollar above the 1.4 mark, and then fell back below the 1.39 mark. The British vaccination process is going well, supporting the pound. According to the British government, as of April 22, about 63% of adult Britons had received at least one dose of the vaccine, and 21% of adults had completed two doses. Among major economies such as the seven major industrialized nations, the UK is currently leading the way in vaccination rates.
In addition, the recent release of good economic data from the UK has also boosted the pound. Data showed that the UK manufacturing and services PMI in April, both better than expected. In addition to this, seasonal factors may be the reason for driving the pound higher. History shows that the pound usually rises in April.
The Canadian dollar spiked at one point. In the Canadian dollar, the US dollar surged higher against the Canadian dollar last week. The CBC will phase out quantitative easing, pushing up the Canadian dollar. Specifically, the CBC will reduce the weekly Treasury bond purchases to C$3 billion from the current C$4 billion. Governor McCollum, as well as other monetary policy members, said that the economy will fully shake off the effects of the epidemic sooner than expected. This shift could prompt them to raise the key benchmark interest rate as early as next year, rather than 2023 as previously stated. This statement from the CBC is much more hawkish than expected. Arguably, the CBC is one of the largest central banks in the developed world to take steps forward in terms of exiting stimulus.
U.S. oil shocks to the downside. Finally, take a look at the oil market. U.S. oil has been shaking lower recently. Market concerns over the outbreak have put short-term pressure on oil prices. In addition, EIA crude oil inventories unexpectedly exceeded expectations, which also weighed on oil prices. Meanwhile, some progress in the U.S.-Iran negotiations also put pressure on oil prices.
However, the good medium-term outlook, given that global crude oil inventories are falling and OPEC shows no obvious signs of increasing production, still supports oil prices. Foreign media reported that the large crude stocks accumulated during the epidemic are now running low, which has saved oil producers.
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