Daily Close | Forex, Metals, Oil, Agriculture June 16, 2021

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Agriculture

Mexican crop conditions in central and southern areas are called good with rains, but earlier dry weather might have hurt production. Cotton growing conditions have improved with rains reported in West Texas and the Delta. Cotton demand remains solid although weaker this week.

Currencies

A further extension of the temporary swap lines will help sustain improvements in global U.S. dollar funding markets by serving as an important liquidity backstop. This stands to bring forward the Fed taper timeline, which is sending the US Dollar and Treasury bond yields sharply higher in turn. less US Dollar volatility is accelerating quickly in the wake of the latest Federal Reserve announcement.

Metals

In Gold, prices remained pinned down to support following last month’s break of the bull flag formation. This plots at 1859.25 and for the past month, this has been a key level for Gold prices.

Oil

less Besides the fact that crude oil is back above $70, what’s even more impressive is how it has gotten there. That type of persistent intraday bid in crude oil has been unprecedented.

United States

Chairmandiscussed the Fed’s new “average inflation targeting” policy last August in which it plans to keep interest rates near 0% even after inflation levels exceed its 2% target. FOMC officials now see two interest rate hikes by the end of 2023 according to the Fed dot plot. The Fed said the asset purchases help ensure a functioning financial market and help provide credit to households and businesses that need it. Eleven Fed members see no change to interest rates through at least 2022.
The Fed also reassured investors it will continue to support the economy via asset purchases while the U.S. recovers from the pandemic. less Photo credit: Dan Smith via Wikimedia Commons The Federal Reserve maintained its target fed funds rate range of between zero and 0.25%. Core PCE for 2022 is now expected at 2.1%.The Fed still estimates the unemployment rate will fall to 4.5% in 2021. If banks are collectively trying to minimize their excess cash ahead of a quarter or year-end, the only institution willing to take that cash would be the Fed.
Only 5 members still see the Fed staying pat through 2023. The Fed’s Monetary Policy Projections shows the Fed expects to hike by the end of 2023. The Fed’s 2022 GDP growth rate projection remained at 3.3%. The Fed is now projecting 2021 PCE inflation of 3.4%, up from previous estimates of 2.4%. Markets now tune in to Fed Chair Powell who will provide additional color on policy guidance during his follow-up press conference.
He has been quoted in a variety of financial news publications, such as CNBC, the Wall Street Journal, and the New York Post. The Fed’s long-term projection is always 2.0%.

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