Open: London Session | Forex, Metals, Oil, Agriculture May 28, 2021



“The US dollar index has started on a marginally stronger note this morning in Asian trade as investors await inflation data due tonight,” the Reliance Securities’ note said. The Dollar at a CrossroadsTwo months ago, the dollar was rallying, and touched its 200-day moving average, suggesting that it was ready to break higher. The offshore yuan has risen more than 2% this year against the dollar and the euro, and a whopping 9% against the Japanese yen.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.09 per cent to 90.04. A bet on bond weakness (with higher yields) would also be a bet on a stronger dollar. If investors believe in that story, the impact on the Chinese and U.S. currencies is another way in which global reflation could translate into a weaker dollar. As a result, the currency pushed past 6.4 yuan to the dollar to its strongest since mid 2018. Most Asian currencies have started flat to marginally stronger against the US dollar this Friday, Reliance Securities said in a research note.
The greenback has lost momentum as gains in Treasury yields stalled, with analysts debating if the dollar will decline further. At the interbank foreign exchange, the domestic unit opened at 72.46 against the dollar, then inched higher to 72.42, registering a gain of 18 paise over its previous close.


Investors have been lured back by gold’s appeal as an inflation hedge, while the Federal Reserve maintains its monetary stimulus and says price pressures should prove temporary. “Still, positions are relatively small.”Others, including Aegon NV’s Robert Jan Van Der Mark, who cut his exposure to gold in November after vaccines were announced, remain to be convinced. Gold could be a beneficiary.— With assistance by Ranjeetha Pakiam, and Yvonne Yue Li(Earlier version of this story corrected spelling of central bank in second paragraph.)
It’s not just gold bugs who have been warning of higher inflation. Spot gold was little changed at $1,895.41 an ounce on Friday and is up more than 7% in May. Gold could be a beneficiary. BOE gold trades at premium.


Global oil benchmark Brent crude futures rose 0.46 per cent to USD 69.78 per barrel. Data this week showed declining inventories of crude and gasoline, and that drivers are traveling almost as many miles on interstates as they did in 2019. Should an agreement be reached, Iranian crude shipments may pick up just as the Organization of Petroleum Exporting Countries and its allies relax collective curbs on exports. Elsewhere, oil climbed to a more than two-year peak and the Bloomberg Commodity Spot Index rose the most in about two weeks.
Ministers from the OPEC+ alliance, led by Saudi Arabia and Russia, are set to meet on June 1 to assess the global market and their production policy. As crude is priced in dollars, they tend to move in opposite directions. The rally in crude is part of a broader advance in commodities. The price of the U.S. benchmark for December 2021 was $4.93 a barrel higher than futures for the same month in 2022. The market’s positive outlook is reflected in WTI’s widening longer-term spreads.

United States

Chair Jerome Powell paid something of an homage to the former Fed chief in his first address in the role to the Jackson Hole retreat in 2018. That sector rotation should be driven by rising bond yields as markets price in growing inflationary pressures in the US economy. From the standpoint of transparency and openness, the public should see the memo to better understand what went wrong in Trump’s DOJ. Perhaps the most important structure that does exist is the phase-one trade deal signed under former President Donald Trump.
It’s a sign that the Biden Department of Justice will reaffirm the department’s commitment to confidentiality and not use the DOJ, as Trump tried to, to score political points. The World Health Organization has asked Sinovac for more data before considering authorization for emergency use, according to the Wall Street Journal. HSBC Holdings Plc, UBS Group AG and ABN Amro Bank NV are among those who expect the Governing Council to prolong current stimulus settings on June 10.
New to the proceedings was Citigroup Inc.’s Jane Frazer, the first woman to run a major Wall Street firm.
HSBC, UBS and ABN Amro are among firms who expect the ECB to prolong current stimulus on June 10. But Trump, a Republican, stalled the effort, saying the tunnel’s costs should be shouldered by the states, not federal taxpayers.


The gains continued early Friday, even after the PBOC issued a carefully worded statement saying the yuan could not be used to offset higher commodity prices. Tsai s government has also accused Beijing of obstructing its efforts to sign supply deals with Western drugmakers. The PBOC had set its daily reference rate in line with market consensus in the previous two trading sessions. Ironically, it could help keep the Chinese Communist Party in power longer as Beijing exploits America’s unremitting hostility to rally the Chinese people.
China has repeatedly rejected accusations that it is abusing human rights in Xinjiang or elsewhere and has labeled criticism from abroad as interference in its internal affairs. Tsai and her party have blamed China for scuttling an earlier order of millions of BioNTech jabs, although Beijing has rejected that claim. For assured stocks and early supplies, it’s a worthwhile investment — provided that Beijing is cautious to not link vaccine access to its own geopolitical agenda.
While President Joe Biden hasn’t gone that far yet, his national-security team has maintained the previous administration’s hardline policies toward Beijing. New Delhi faces tough issues, from long-standing territorial disputes to a deep suspicion of Beijing’s Belt-and-Road strategy. Add Taiwan, Hong Kong and Xinjiang to that list.By comparison, trade is a far less contentious matter.


The EU is working on new sanctions that could target potash, a soil nutrient that’s one of Belarus’s biggest exports, after the Ryanair incident. Putin backed Lukashenko’s brutal crackdown on protests against last year’s disputed presidential elections that triggered EU, U.K. and U.S. sanctions on Belarus. Germany chooses a chancellor not named Merkel later this year, and France decides whether to give Emmanuel Macron another term early next year. The ECB will unveil new economic projections that should confirm a far brighter outlook as vaccinations pick up.
A gauge of optimism rose five percentage points to 37 this month, a level last reached before the Brexit referendum, the Lloyds Bank Business Barometer shows. “If yields continue to rise, the ECB may buy more. Some economists reckon the ECB will opt for vaguer language.