Market Update, 16 June 

FED and eased Fears!

By: Ahura Chalki

Market analyst – IFC Markets

Yesterday U.S. data was mixed, and now investors are looking carefully at the FOMC meeting and its announcement. Retail Sales Ex-Food & Energy came out at -1.3% and 0.7%, respectively, and both less than estimates. On a yearly basis, and compare with May 2020 high, both were lower by 19.0% and 13.0%. 

Overall, exact numbers can confirm that consumers are spending more on services now than products, and based on seasonal changes, it seems normal, especially after easing lockdown. 

While today’s market participants are focused on the Fed’s FOMC and the government’s infrastructure plans, yesterday’s published data caused no significant fluctuations in the market. On the other hand, thanks to the overall weaker than expected numbers, the market’s concerns about inflation decreased, and it may consolidate the Fed’s original policy stance. Therefore, for today’s FOMC meeting, the market expects the Fed to maintain its policy at least until the Jackson Hole Global Central Bank Annual Meeting in late August, and may even hold its $120 billion/month bond purchase scale until year-end.

Also, according to the White House, the two parties will have to deal on the infrastructure plan within 7 to 10 days. Otherwise, the bill will not be ruled out through the budget coordination process. However, some members of the Democratic Party expressed hesitation about the plan, which means that President Biden’s desire to obtain 51 Democrats’ votes to support the bill is still a difficult challenge.

Fx Market 

DXY: Yesterday, the U.S. dollar index hit a 1-week high in the day and then pulled back to 90.38, and now trading around 90.50 level

Euro: E.U. and the U.S.’s announcement of the suspension of retaliatory tariffs on Airbus and Boeing aircraft subsidies, the euro rose to 1.2147 against the U.S. dollar yesterday and then moderately fell to 1.2124, and since that pairing trading soft and waiting for important news and data to find the trend.

GBP: Cable tested one month low after announcing the delay in reopening and then rebounded above 1.4120 level. 

Yen: Yen was stronger against USD, and now USDJPY trading at 109.90

Australian and New Zealand dollar: After the Bloomberg report about the Housing bubble, both currencies lost ground.

Commodities:

Gold: Gold recorded a 3-day losing streak but remained stable at a critical level at $1,860; 

Silver: Silver traveling between US$27.00 and US$28.00 for nearly a month and need a more substantial reason to find the direction. 

Oil: Sharply decrease in private sector inventories by 8.537Mb in last week, boosted the Oil to its two-year high. Today ahead of FED, the market is a bit silent, and Oil also lost some parts of its earlier gains. WTI trading under $72.00 after an earlier high above 72.45.


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