Close: London Session | Forex, Metals, Oil, Agriculture June 14, 2021

672z311_1579281304_shutterstock_434098780

Agriculture

In the overnight electronic session, the July corn is currently trading at 668 which is 16 ½ cents lower. Imports of soybean oil increased to 1.64 mt during November-May against 1.57 mt in the year-ago period. Over two decades ago Jay got his start at the Kansas City Board of Trade in the Wheat Futures pit. This week the Midwest is forecasted for hot and dry weather.

Currencies

Global yields continue to favor the dollar and investors are taking advantage which should push the dollar up and inflation down. While gold is not the equivalent of the Dollar Index (DXY), its performance/underperformance against the dollar triggered similar reactions from other G10 currencies. There are still things to worry about on the inflation front but sustaining current inflation rates is probably going to require an assist from the dollar. less Gold prices extended lower during Monday’s APAC session after falling 1.14% on Friday, as the US Dollar climbed alongside longer-dated Treasury yields.
By contrast, the generally strong dollar of the last decade kept CPI inflation under the Fed’s target almost the entire time. Having said that, the Fed is unlikely to discuss tightening this week, which may send the dollar lower again. Hence, the economic accommodation in the United States led to a declining dollar compared to its peers and rising inflation.
Here are some arguments against such a thesis and why, in fact, excessively high inflation may be a positive for the dollar. In the last weak dollar period from 2002 to 2008, the annual rate of inflation exceeded the Fed’s 2% target for 5 consecutive years (2003-2008). The first argument for a stronger dollar is the tight correlation between inflation, as measured by the US headline CPI and the 10-year US Treasury yield.

Metals

The yields on the 10-year US Treasury bond and the price of gold have an inverse relationship – when the yields rise, the price of gold declines. The Gold Analyst offers quality technical and fundamental analysis of the price of gold to help educate readers in their investment decisions. Even central banks around the world, despite refusing to redeem their fiat currencies in gold, continue to hold and accumulate gold in their own reserves. Another example of undue anticipatory reaction is Friday‘s gold weakness, in all likelihood to Thursday‘s Macron push to make G7 sell their gold to bail out Africa.
However, as expected it was another positive trading week for black gold which closed firmly higher on excellent volume (and rising on the previous week). Higher yields, on the other hand, push down the price of bonds – but also trigger an inverse reaction for the price of gold. Continuous expansion of the Fed’s holdings may support the price of gold, whereas a slowdown in the pace of asset purchases may result in the opposite.
Case in point: while gold, silver and mining stocks are looking forward to their summer vacations , the USD Index has been hard at work rehabbing its reputation. In China, dealer discounts fell from $20-$50 to $7-$12 per ounce against global benchmark spot gold rates. Radomski is the author of Sunshine Profits’ Gold & Silver Trading Alerts and many of company’s investment tools.

Oil

India imported 4.56 million tonnes (mt) of palm oil (including crude palm oil and RBD palmolein) during November-May 2020-21 compared 3.67 mt in the corresponding period a year ago. Mehta said that the higher spread between soft oils and palm oil encouraged the import of palm oil to India during the first seven months. Talk of the waivers caused the grain market to sell off and the oil market to rally as we would use left AG hindwing and more oil. Headphones that in recent weeks into abandon the oil complex as they worried that the resumption of Iranian nuclear talks would bring a flood of oil to the marketplace.
Oil prices sold off sharply after a report that sanctions on Iranian oil were lifted. India imported 1.27 mt of sunflower oil during the review period against 1.64 mt in the corresponding period a year ago. Signals from oil market are also pointing upwards on optimism that increased vaccine roll-out has led to higher mobility and higher fuel demand.
Sunflower oil imports declined by 22.35 per cent during the period in view of the high price. BV Mehta, Executive Director of SEA, said that the import of soft oils (which includes sunflower oil) decreased due to high prices in the global market.
Spending on oil extraction fell last year to about $330 billion, less than half the total from its 2014 record, according to research firm Wood Mackenzie.

United States

Markets are still dealing with a super hot inflation number from last week with the Producer Price Index up next and the Fed meeting begins tomorrow. Property shares in the US were last week’s top performer for the major asset classes for a second straight week, based on trading through Friday’s close (June 11). Wall Street futures rose as focus shifted to the Federal Reserve’s meeting this week, where the central bank is expected to maintain its accommodative stance on monetary policy.
High inflation could force the Fed to tighten monetary policy faster than it wants, causing cascading impacts to an economy dependent on debt, and thus, resulting in low-interest rates. less Over the last couple of months, the Fed started its campaign to prepare markets for a “taper” of its asset purchases. The bond market remains very calm about Fed policy, with Chair Jerome Powell s messaging on inflation s transitory nature clearly being heeded. The US yield is at 1.46% after shedding 10 bp last week, the most since last June.
The US inflation is rising at the fastest pace in the last three decades. In this regard, traders will keep a close eye on the Fed’s assessment of inflation following the hottest headline CPI reading in more than a decade in May. The Fed’s preferred “core” rate of inflation excludes food and energy and fails to track actual home prices—some of the biggest real-world costs for consumers.

China

European leaders such as France’s Emmanuel Macron and Italy’s Mario Draghi stressed the need to cooperate with Beijing. US, Europe, Canada, and Japan’s disapproval of Beijing’s domestic and foreign policy is clear, and it does not appear to have much impact. Central and Eastern European nations have also cooled on Beijing’s Belt and Road Initiative.

Europe

The large issuance pressure will likely put some pressure on existing EU bonds, but ECB purchases will offset at least some of that pressure. Even if we expect overall ECB net purchases to fall in the autumn, the share of supranational purchases will likely increase, in line with increasing EU bond issuance. One could look to buy the new bond with pick-up vs existing EU, European Financial Stability Facility (EFSF) and European Stability Mechanism (ESM) bonds in the maturity area.
less The financing for the EU’s recovery fund will finally start tomorrow with a new 10-year EUR benchmark. The weekend’s G-7 communiqué was mainly hawkish on China, but the accompanying commentary highlighted the balancing act the EU has to pull off. While the UK was beset on the Brexit front, two other pending deals suffered through the weekend. Being able to sign faster trade agreements was one of the selling points of Brexit. Global Headlines Reality check | The G-7 summit couldn t paper over divisions on issues from climate change to Brexit.
The Commission also intends to start auctioning EU-Bills and EU-Bonds as of September 2021. His feature articles have been published on: FXstreet.com, Thestreet.com, Action forex, Forex TV, Istockanalyst, ForexFactory, Fxtraders.eu, Insidefutures.com, etc.

0