Open: New York Session | Forex, Metals, Oil, Agriculture February 17, 2021



Ethanol margins in the Corn Belt have dropped sharply due to the frigid weather, falling to negative-$3.92 a gallon, lowest since at least 2010, Refinitiv Eikon data showed. Almost all major commodities are up year to date except for precious metals, cocoa, and coffee.


Dollar index The dollar index that stayed weak in the first half of yesterday was lifted by the bulls resulting in a quick rally. MARKET NEWS Gold prices extended losses for a fifth straight session, slipping to near two-week lows as soaring U.S. Treasury yields and a firmer dollar dented the bullion’s appeal. Moreover, the overall trend is bearish, and the dollar index is hinting at the possibility of the dollar being dragged down. In global markets, gold prices fell to near two-week lows amid a stronger US dollar and hardening of US bond yields.
less Interesting to note that the dollar has declined in tandem with economic policy uncertainty, as measured by the Baker, Bloom & Davis index (and predicted by historical correlations). The rupee depreciated 23 paise to 72.92 against the US dollar in opening trade on Wednesday amid a muted trend in the domestic equity market and strengthening American currency. The DXY US Dollar Index rebounded from a two-week low to 90.64, exerting further pressure on gold and crude oil prices.
A more dovish-than-expected stance from policymakers may lead the US Dollar lower and probably provide gold prices some support. When the balance changes so that a rate hike seems more likely than a rate cut, 5-year euro rates may soar and the 2/5/10y butterfly may fly higher. A depreciated dollar will encourage expenditure switching to the extent that exchange rate pass through is high (which is higher if from monetary shocks).


less Gold and WTI crude oil prices both traded lower during Wednesday’s APAC session, as the US Treasury yields climbed to their highest level seen in almost a year. Looking ahead, an impending US fiscal stimulus package, improving pandemic situations, as well as a brighter economic outlook may lead yields to rise further and thus suppress gold prices. Copper prices hovered around their highest level since 2012 on optimism about a swift global economic recovery that bodes well for metals demand, against the backdrop of tightening supply.
Tracking softer global prices, gold prices in India skidded for the fifth day in a row. Note that the recent fall in global rates and import duty cut in the Budget has pushed gold prices in India to near multi-month lows. Gold prices are trading up by 0.4% at Rs 46,698 per 10 grams. On MCX, April gold futures were down 0.3% to Rs 46,772 per 10 grams, falling close to their lowest levels since June 2020. Higher returns on US debt hits demand non-yielding gold Attention will now turn to US Retail Sales and the minutes from the latest FOMC meeting for direction.
Source: Bloomberg, DailyFX Technically, gold prices extended lower within a “Descending Channel” formed in early January. In August gold had hit a record high of Rs 56,200 per 10 grams.


MARKETS TODAY OIL: Oil prices advanced further, underpinned by major supply disruption in the south of the United States this week caused by a winter storm in Texas. The bound rate is as high as 300 per cent for palm oil, while on other oils it varies between 45 and 100 per cent. Natural gas prices have soared because of power needs, hitting their highest levels in years due to the cold snap. Crude prices have rallied to their highest level in almost a year, sparking optimism among shale producers after a slump in fuel demand.
Rolling power cuts extended well beyond Texas, and some natural gas power plants also went offline because cold weather restricted their operations. Expectations that the OPEC+ would begin to take advantage of the higher prices by bringing in more supply from Apr onwards has also helped reduce the impact. It does little to reduce fossil fuel use but makes America more dependent on less secure oil from Latin America, Africa and the Middle East.
To view the full Middle East fuel oil report click here You can access the full report here. Malaysian palm oil futures climbed 3%, extending gains into a third session, as rival Chicago Board of Trade (CBOT) soyoil rose and the ringgit weakened.
Oil went negative about 10.5 months and now it’s in the low $60s.

United States

A group formed last year is reviewing cost-cutting efforts to make sure they don’t impede regulatory commitments, The Wall Street Journal reported last year. Taper Tantrum led to swifter lift-off expectations In short, 2013 tells us that the Fed struggles to separate tapering of asset purchases and lift-off expectations. Nasdaq Futures are trading up by 5 points (flat) while Dow Futures are trading up by 27 points (up 0.1%) The rupee is trading at 72.81 against the US$.
Attention will now turn towards US retail sales and FOMC minutes for clues as to the next steps the Fed could take and whether the reflation trade has merit. Also, when estimating the upside potential, it’s worth noting that since 2012 the 2/5/10y reached zero only during the Fed’s taper tantrum in 2013 and early 2018. Back in 2013, positive data surprises during 2013, in combination with the proposed tapering from the Fed, gave rise to a huge bond market sell-off. Today, Wall Street continues to use Zacks research including the Zacks Rank and Zacks Equity Research, which combines the best of quantitative and qualitative analysis.
US stock futures are trading higher today, indicating a positive opening for Wall Street. The markets responded by pricing a swifter Fed lift-off of more than 125 basis points over the next 3 years. The correlation broke down when the Fed temporarily exempted banks’ holdings of Treasuries in the leverage ratio.


Finland s prime minister, Sanna Marin, is expected to survive a no-confidence vote in parliament today over her government’s handling of the EU recovery fund. Pay 5/10/30y butterfly spread 1y forward Pay EUR 1y10y outright The ECB’s forward guidance has kept 5-year rates low. Goldman devised derivatives products that were based on complex models of how various markets would react if Brexit passed. The market is still leaning towards an ECB rate cut. The European Union overhauled its copyright laws in 2019, though the changes seem more limited in scope and power.
This level is near the post-Brexit vote lows, too. The 8th ECB €STR forward has recently been about 3-4bp lower than the €STR fixing. The European Union finalized an agreement with Pfizer and BioNTech of Germany for 200 million more doses of their vaccine.