Financial breakfast: the dollar strengthens, gold rises and falls, oil prices fall by 3%, pay attention to the minutes of the Fed meeting

The U.S. dollar is rising, and market participants will look for clues in the upcoming June meeting minutes to understand when the Fed will begin to reduce its large-scale debt purchases to fight the epidemic; the commodity currency Canadian dollar , Norwegian Krone fell sharply against the U.S. dollar. Spot gold closed up slightly, rising by more than 1% during the intraday session, refreshing its high since June 17 to US$1815.05 per ounce. The strengthening of the US dollar index restricted the rebound of gold prices. Oil prices hit the biggest drop since the end of May, and oil distribution fell nearly 3% in late trading. The strengthening of the US dollar stimulated widespread selling in the entire commodity market, and the uncertainty surrounding OPEC’s next move is also increasing.

In terms of commodity closing, WTI August crude oil futures closed down 1.79 US dollars, or 2.38%, to 73.37 US dollars per barrel; Brent September crude oil futures closed down 2.63 US dollars, or 3.41%, to 74.53 US dollars per barrel. COMEX August gold futures closed up 0.6%, at 1,794.20 US dollars per ounce.

US stocks closed: the S&P 500 index fell 0.2%, the largest decline since June 18; the Dow Jones Industrial Average fell 0.6%, also the largest decline since June 18; the Nasdaq Composite Index rose 0.2%, Nass The Daq 100 index rose 0.4% to a record high; the Russell 2000 index fell 1.4%.

Wednesday preview

Time Area Index Previous value Predicted value
14:00 Germany May seasonally adjusted monthly rate of industrial output (%) -1 0.5
14:00 Germany Annual rate of industrial output after adjustment on working days in May (%) 26.4 17.7
14:45 France May trade account (100 million euros) -62.44 -61
16:00 China June foreign exchange reserves (100 million US dollars) 32218 32010
22:00 Canada June PMI 64.7 after IVEY seasonal adjustment
22:00 US May JOLTs job vacancies (10,000) 928.6 931.3
04:30 AM US API crude oil inventory changes in the week ending July 2 (10,000 barrels) -815.3
04:30 AM US API gasoline inventory changes in the week ended July 2 (10,000 barrels) 241.8
04:30 AM US As of the week of July 2nd, API Cushing crude oil inventory changes (10,000 barrels) -131.8
00:00 in the morning EIA announces monthly short-term energy outlook report

02:00 in the morning, the Federal Reserve announces the minutes of the monetary policy meeting

03:30 AM 2021 FOMC Voting Committee and Atlanta Fed President Bostic delivers a speech

List of major global markets

Financial breakfast: the dollar strengthens, gold rises and falls, oil prices fall by 3%, pay attention to the minutes of the Fed meeting
The fall in the US stock market ended the previous seven consecutive days of closing a record high. The yield on US Treasury bonds fell to the lowest level since February, dragging down bank stocks and small stocks. The S&P 500 index was lower led by the energy and financial sectors. Amazon pushed the Nasdaq 100 index to a record high.

The yield on the benchmark 10-year U.S. Treasury fell by 7.4 basis points, falling below 1.35%, the lowest level since February 24; the yield on the 30-year U.S. Treasury fell by 5 basis points to 1.99%, testing the 200-day moving average at 6. It fell below 2% for the first time since March 21. The US service industry expanded at a slower-than-expected rate in June, and the ISM service industry index fell to 60.1 from a record of 64 in May.

Alpine Woods fund manager Sarah Hunt said that when the 10-year Treasury yield fell below 1.45%, people began to feel nervous, and people worried that this would indicate a slowdown in the economy.

Precious metals and crude oil

Due to the strengthening of the US dollar, spot gold fell sharply. It closed at around US$1797 in late trading, hitting US$1815.05 per ounce during the session, the highest level since June 17. Investors paid attention to the minutes of the Fed’s latest policy meeting to determine interest rate trends.

Financial breakfast: the dollar strengthens, gold rises and falls, oil prices fall by 3%, pay attention to the minutes of the Fed meeting
ThinkMarkets analyst Fawad Razaqzada said that in the past few days, we have seen that central banks are trying to dispel the idea of ​​premature interest rate hikes. Investors recognize that monetary policy will remain at a very easy level from historical levels, which is one of the reasons for the decline in U.S. bond yields, which will help gold prices stabilize after the sharp decline in June.

Oil prices fell sharply on Tuesday, the largest drop since the end of May. The oil price fell nearly 4% in the intraday trading. The reason was that the strengthening of the US dollar stimulated widespread selling in the entire commodity market, and the uncertainty surrounding OPEC’s next move is also increasing. high.

Financial breakfast: the dollar strengthens, gold rises and falls, oil prices fall by 3%, pay attention to the minutes of the Fed meeting
The news of the breakdown of the negotiations initially pushed up oil prices. U.S. oil spiked to a six-year high early in the session, but then oil prices fell. Traders are concerned that this conflict will cause some state-owned oil companies to increase supply and start to increase crude oil exports. Sex.

Tamas Varga, an analyst at PVM Oil Associates Ltd., said that the OPEC+ production policy will have a lot of uncertainty in the next few months, which will lead to increased volatility.

White House Press Secretary Jen Psaki said that Biden administration officials had talked with Saudi Arabia and UAE officials, hoping to reach an agreement to prevent the rise in crude oil prices.

Bob Yawger, head of energy futures at Mizuho, ​​pointed out that the market is worried that the UAE will step in and unilaterally increase crude oil production, and other OPEC members will follow suit.

Foreign exchange

After the U.S. Independence Day long weekend, the U.S. dollar rose against a basket of other currencies on Tuesday as traders placed positions before the release of the minutes of the Fed’s June meeting. The Japanese yen led the gains among the G-10 currencies; the Swiss franc was also among the strongest performing currencies; the Canadian dollar hit a two-month low, and as crude oil fell, the Norwegian krone led the decline among the G-10 currencies.

Financial breakfast: the dollar strengthens, gold rises and falls, oil prices fall by 3%, pay attention to the minutes of the Fed meeting
The U.S. dollar index rose 0.31% to 92.53, unaffected by the decline in U.S. Treasury yields. Previous data showed that the growth of the U.S. service industry has slowed, and the benchmark 10-year U.S. Treasury yield is likely to record its longest consecutive decline in 16 months.

According to data from the Institute of Supply Management (ISM), the service industry activity in the United States slowed down in June, which may be affected by labor and raw material shortages, leading to a continued increase in unfinished work. The ISM service sector employment sub-index fell to 49.3 in June from 55.3 in May.

Market participants will look for clues in the June meeting minutes to be released on Wednesday to understand when the Fed will begin to scale back its large-scale debt purchases to fight the epidemic as the economy recovers.

Edward Moya, senior market analyst at OANDA, said that investors are preparing for the meeting minutes to show that the Fed’s turn to the eagle may be stronger than thought, which should provide some upside for the dollar.

Joseph Trevisani, a senior analyst at FXStreet.com, said that although from the data point of view, the development of the U.S. economy will not prompt the Federal Reserve to raise interest rates quickly, the U.S. economic growth is still leading and far ahead of its competitors.

Data released by Europe was disappointing, with the euro falling to a three-month low against the dollar. The ZEW Institute for Economic Research reported that, as the largest economy in the Eurozone, investor confidence in Germany remained high, but fell sharply in July. At the same time, data showed that German industrial orders in May saw the largest drop since the first blockade in 2020; the data dragged down the euro against the dollar by 0.34% to 1.1824, and last week fell to the low of 1.1807 in early April. Brad Bechtel of Jefferies said that if it falls below 1.1800, it will continue to decline towards the March quarter-end low of 1.1700.

European Central Bank policymakers are discussing a new strategy, and many people now support the idea of ​​letting the inflation rate exceed 2% for a period of time, which has been below this level for most of the past 10 years.

The dollar fell 0.31% to 110.63 against the yen; next look at the 21-day moving average 110.44; Citigroup’s Tom Fitzpatrick suggested shorting the dollar against the yen at 110.63, with a stop loss of 111.95 and a target of 107.50; he said that the actual yield and the dollar index There is a “disconnection” between them, and this divergence further widened on Tuesday as real yields fell.

The British pound fell 0.32% to 1.3800 against the U.S. dollar, having previously hit a one-week high of $1.3888; the market expects that the UK will remove restrictions related to the new crown epidemic in two weeks, becoming the first major official to officially start accepting the existence of the new crown virus. country.

The New Zealand dollar fell 0.23% against the U.S. dollar to 0.7011, giving up its earlier gains as traders bet that New Zealand might raise interest rates as early as November due to strong business confidence survey data.

The Australian dollar fell 0.44% to 0.7497 against the US dollar. It had previously risen by 1.2% after the Reserve Bank of Australia reduced bond purchases and adjusted interest rate expectations, opening the door to the possibility of interest rate hikes before 2024. This decision allowed the Reserve Bank of Australia to join a small but growing central bank club that is withdrawing from large-scale epidemic stimulus measures.

The U.S. dollar rose 0.96% to 1.2461 against the Canadian dollar; at one point it rose 1.2% to 1.2495, and the Bloomberg Commodity Index fell as much as 2.5%, the largest drop since June 17. The surge in the currency pair also reflects that traders will move early this year. The short positions established at some time were closed. These short positions were originally created to take advantage of the market mentality of economic growth/re-inflation; CIBC strategist Bipan Rai said that many central banks are now tilting towards tightening policies, which will reduce In support of economic growth, he expects the exchange rate to move to the area of ​​1.2630 to 1.2640.

International news

[US June ISM non-manufacturing index fell to 60.1] Analysts said that the expansion of the US service industry in June was lower than expected, and the index measuring employment showed contraction, reflecting the difficulty of employers in attracting employees. ISM’s service industry index fell to 60.1 last month from a record of 64 in May. The index above 50 indicates that the economy is in a state of expansion, and orders and business activities have also rebounded. Although the data has cooled down from a month ago, the report shows that the demand for services such as catering, hotel accommodation and tourism remains strong. ISM’s order backlog index is the highest in the organization’s data since 1997.

[The Biden administration has a dialogue with Saudi Arabia and the UAE on OPEC negotiations and oil price issues] The White House Press Secretary Jen Psaki said that Biden administration officials are “encouraged” by the ongoing OPEC negotiations, and have joined hands with Saudi Arabia and the United Arab Emirates. Officials talked, hoping to reach an agreement to stop the rise in crude oil prices. We are not a party to these negotiations, but during the weekend and this week, we have had many high-level dialogues with officials from Saudi Arabia, the UAE and other relevant partners. The United States hopes that negotiations can reach an agreement to promote the ability to obtain affordable and reliable energy. The US government is very concerned about the impact of the negotiations on US gasoline prices. The President hopes that Americans will have access to affordable and reliable energy, including gasoline prices. This is why our team constantly monitors gasoline prices and communicates directly with OPEC parties to advance the agreement and allow the proposed increase in production to move forward.

[JP Morgan Chase: The oil market faces a “historical gap” OPEC+ needs to inject “stability” into the market] Christyan Malek, head of oil and gas research at JPMorgan Chase, said OPEC+ is guiding the demand “just out of the restricted zone”. The oil market will face a “historical supply gap” in the next few quarters; there is still uncertainty in the future growth of supply and demand, which will increase the selling pressure at the long end of the curve. Tuesday’s oil price reaction stemmed from concerns or “suspicion that this is not the real oil price. The events of the last two or three days remind us that OPEC+ is trying to solve the problem”. OPEC’s failure to reach an agreement is “not surprising” and will not rise to the point of a crisis or serious dispute.

Domestic news

[A-share market value style performance or better] Huihua Financial Asset Allocation Director and senior investment manager Zeng Rui said in an interview a few days ago that investment needs to be flexibly switched among various asset classes according to market changes to obtain flexible returns. Looking ahead to the A-share market outlook, Zeng Rui believes that in the past quarter, benefiting from the abundant market liquidity, the growth style performed better than the value style. The stock market may continue to be in an upward trend, superimposed on the resonance of the global economic recovery, which is more conducive to the performance of value style. (China Securities Journal)

[Sales prices of listed pig companies continue to decline, and purchasing and storage help prices stabilize] Since the beginning of the year, pig prices have experienced a rare continuous decline, with a large amplitude and a long period of time. In June, the price of pigs showed a fluctuating trend. Although the market once ushered in a skyrocket in the second half of the month, the average monthly sales prices of many leading pig companies fell again from the previous month, and the industry sales prices continued to be sluggish. As for the pig price outlook, according to the news, the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Finance and others have recently launched the 2021 central reserve pork purchase and storage work. It is scheduled to be auctioned on July 7 for the first batch of central reserve frozen pork 20,000 yuan this year. Ton. The industry generally believes that this move will help boost the confidence of the breeding end, and the price of pigs may stabilize.

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