Daily Close | Forex, Metals, Oil, Agriculture March 17, 2021



less The US Dollar is moving broadly higher with Treasury yields as traders digest the latest update from the Federal Reserve just crossing market wires. This disappointed US Dollar bulls and sent the broader DXY Index snapping sharply lower alongside softer Treasury yields. Gold price action popped higher, as did the Nasdaq, following a weaker US Dollar and softer Treasury yields. In the short term, the pushback against raising interest rates is adverse for the value of the dollar.
We target 1.1750 in EURUSD over the next 2-3 months.


In the US, the Energy Information Administration showed that crude oil, gasoline and distillate stockpiles all rose last week further pressuring prices. The April East-West 380 fuel oil differential flat $0.00 to $14.00/mt, while the May contract lost $0.25 to $13.75/mt. The recent rise in gasoline prices has also been incredibly consistent.

United States

By committing to staying behind the curve (as Powell did tonight), the Fed will also allow long bond yields and inflation expectations to run hotter than currently. A brightening economic outlook and building inflation expectations have fueled breakeven rates and bond yields higher, pushing traders to price in a Fed hike by March 2023. Keeping the target Fed Funds rate low looks to help boost Fed credibility given its new pursuit of average inflation targeting (AIT).
Furthermore, several FOMC officials have welcomed the rise in sovereign bond yields seeing that it reflects better economic outlook for the US economy. “All attention is focused on the dot plot and when the Fed anticipates its first rate hike,” said Keith Buchanan, portfolio manager for GLOBALT Investments in Atlanta. It requires rules and risk management along with the ability to adapt to changing market conditions.” less The Fed reiterated its commitment to monetary nonsense today.
Against this backdrop, it appears the more likely Fed policy headlines for this year will center around its balance sheet. FOMC officials decided to leave the target Fed funds rate range unchanged at 0.00-0.25% as widely expected. Wall Street has lobbied hard to get an extension, saying the federal government’s ongoing stimulus efforts are still driving the need for banks to absorb their customers’ low-risk assets. The FOMC Statement today shows the Fed remains on autopilot insisting on 2% inflation that is already here by any sensible measure.
The index is also price cap-weighted, unlike the S&P 500 Index and the Nasdaq Composite which are market cap-weighted. less A Federal Reserve (Fed) meeting on St. Patrick’s Day—for a bond guy like me, there’s nothing like it. The Nasdaq 100 fell as much as 1.5% on Wednesday as long-dated Treasuries continued to sell off, pushing 10-year yields to 1.67%, the highest since before the pandemic.. The April 21 ULSD CIF Med cargoes differential was flat from the previous close at $3.50/mt, while the May 21 differential was flat at $4.00/mt.
The April 21 ULSD CIF NWE cargoes differential was flat from the previous close at $2.00/mt, while the May 21 differential was flat at $3.00/mt. Jay Powells commitment to quantifying what moderate overshooting means when overshooting happens will throw the Fed directly into this discussion in 1 or 2 months from now. In fact, since March 2020, the Fed’s System Open Market Account (SOMA) has risen by over $3.1 trillion, with a little under $300 billion occurring year-to-date.
In terms of the Fed’s balance sheet, the policy makers’ holdings of Treasuries, mortgage-backed securities (MBS), and agencies have now topped $7 trillion.
Looking ahead, markets now await the follow-up press conference hosted by Fed Chair Powell where he will look to provide additional color on the latest FOMC announcement. However, as James Stanley highlighted recently, the US 10-Year Treasury note yield in 2021 has shared a similar trajectory to Bitcoin, with rates surging approximately 80% from January’s low.


BABA today had its browser banned by Beijing as part of the crackdown on internet companies.