Saturday, 19 June 2021

Week to Jun 18th

Hawkish Fed Surprises, best week for USD in 15 months, Oil & NDX up


The big event this week was the FOMC meeting, who were much more hawkish than expected. The Fed dot plot suggested rates would be increased in 2023, a year earlier than previously thought. There was an immediate 9bp rise in the US 10-year rate, and even larger moves in the shorter dated paper. Equity markets, which had briefly touched new highs earlier in the week, fell immediately, and fell much further on Friday. The exception was DJI where further rotation back into tech pushed the industrial index to touch May lows, its worst week since October. The dollar, of course, shot up, with currencies and Gold falling. Gold and most currencies had their worst week since March 2020, with NZD touching a 2021 low. Many other commodities continued to unravel blow off uptrends and lumber is now 50% down from its highs while copper is down 15%. Oil was an exception, rising to levels not seen since Oct 2018.


The biggest mover this week was DJIA, down 3.45%. Every currency was sharply down against the dollar, with the strongest move being AUD down 2.95%. Crypto was relatively quiet, and FANG outperformed NDX overall.

Any dollar buy would have done last week. My NZDUSD short made 2.73%, moving me at last into positive territory, profit year to date 2.51% and 17/23 wins. I think USD will continue to rise, I will buy USDJPY.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold)

Summer officially starts on Monday, traditionally the lowest volume and therefore quietest period of the year. The key events are as follows. The BoE meeting has potential to the hawkish side. The UK has, like the US seen a surge in inflation, and money markets have already tightened this week. Talk of taper is possible which would be bullish for GBP. Staying with CBs, Chair Powell testifies on Tuesday to the House COVID committee, although a week after the official FOMC meeting, surprises are unlikely. The PCE figures (the Fed's preferred inflationary measure) will be important, especially if they surprise, of course, as will the Jobless Claims, ahead of the July NFP. Finally, it's the full Markit PMI week, a general measure of corporate health.

Monday June 21
01:30 PBoC Interest Rate Decision (e3.85% hold)
01:30 Aus Retail Sales (e0.7% p1.1%)
12:30 Chicago Fed National Activity Index
12:30 ECB President Lagarde Speech
19:00 Fed Williams speech

Tuesday June 22
14:00 Eurozone Consumer Confidence
18:00 Fed Chair Powell testifies
23:00 Aus Commonwealth Bank PMIs
23:50 BoJ MPC Minutes

Wednesday June 23
05:00 Japan Leading Economic Index
07:30 Germany Markit PMIs (Mfr e63.0 p64.4)
08:00 Eurozone Markit PMIs (Comp e58.7 p57.1)
08:30 UK Markit PMIs (Svcs e63.0 p62.9)
12:30 Canada Retail Sales (e-5.1% p3.6%)
13:45 US Markit PMIs
14:00 US New Home Sales
18:00 ECB President Lagarde Speech

Thursday June 24
06:45 BoJ Governor Kuroda speech
08:00 Eurozone Economic Bulletin
08:00 Germany IFO Sentiment Indicators
11:00 BoE Rate Decision/Statement
12:30 US Durable/ND Capital Goods (Durable e1.9% p-1.3%)
12:30 US PCE QoQ
12:30 US Jobless Claims
12:30 US Q1 GDP (Annualised e6.4% p6.4%)
20:30 US Bank Stress Test Report
23:30 Tokyo CPI

Friday June 25
06:00 Germany Gfk Consumer Confidence
12:30 US PCE MoM and YoY
14:00 Michigan CSI