CAPITALDIGEST 15/06/2021. DAILY NEWS.

MONDAY 7/6/2021 – DOLLAR DIPS SLIGHTLY AS INVESTORS WAIT ON THE SIDELINES The dollar edged lower on Monday as investors looked ahead to European and U.S. central bank meetings and U.S. inflation data after Friday’s lower-than-expected jobs data. Friday’s U.S. jobs data had put pressure on the dollar as investors bet that jobs growth was not strong enough to raise expectations for the U.S. Federal Reserve to tighten its monetary policy. There was little movement in major currency pairs and the S&P 500 was modestly lower without U.S. economic data to help give it direction on Monday. {.N] The dollar index was down 0.1% while the euro was up slightly against the dollar, at $1.2177 . “At this point it looks like the market really wants to be short dollars. To us it suggests there’s a risk chasing this move. It’s a crowded position. You’ve already got a sizeable chunk of the market that’s net short U.S. dollars so if feels like we need a shakeout of those positions,” said Bipan Rai, North America head of FX strategy at CIBC Capital Markets. While Rai said there was “some risk the dollar will rally” he noted that investors are waiting for Federal Reserve’s meeting next week. The foreign exchange market sees no reason for the Fed to change its monetary policy, “so we’ve still got accommodative monetary policy in the United States,” said Kit Juckes, head of FX strategy at Societe Generale. Market participants will also be looking at U.S. inflation data and the European Central Bank meeting, both on Thursday.   TUESDAY 8/6/2021 – FX VOLATILITY LOW, DOLLAR UP SLIGHTLY AS INVESTORS WAIT ON INFLATION The U.S. dollar edged up slightly and currency market volatility on Tuesday hit the lowest level in more than a year, as investors sat on the sidelines waiting for clearer signals on inflation levels and central bank policies around the world. With inflation updates expected from China, Europe and the United States this week and an impending European Central Bank meeting on Thursday to be followed by a U.S. Federal Reserve meeting next week, currency investors appeared to be treading water while the S&P 500 dipped very slightly. Range-bound currency markets meant a fall in volatility. The Deutsche Bank Currency Volatility Index (.DBCVIX) hit its lowest level since February 2020. “All the major currencies are having muted reaction right now as they wait,” said JB Mackenzie, managing director of futures and forex at TD Ameritrade. “We’re looking at the inflation numbers to see how the economies are running. Are they very hot and, if so, does that mean there could be a reaction from central banks globally?” Traders on Tuesday sent longer-term U.S. Treasury yields to their lowest in more than a month after a report showed small business owners less confident, and narrowing the spread of a closely watched part of the yield curve. The dollar index was last up 0.12%, while the euro fell 0.09% against the greenback to $1.2179 . The British pound fell 0.15% to $1.4155 and the Australian dollar eased 0.21% to $0.7739 , with both stuck in ranges seen over the past couple of months.   WEDNESDAY 9/6/2021 – DOLLAR EDGES LOWER AHEAD OF INFLATION PRINT, ECB MEETING The dollar hovered at the lower end of recent gains on Wednesday as traders looked to upcoming U.S. inflation data and a European Central Bank (ECB) meeting to gauge the pace of global recovery and policymakers’ thinking about paring back stimulus. Investors have piled up bets against the dollar, but are growing nervous about whether the beginning of the end of enormous monetary stimulus is nigh – and worry that interest rate rises could end a 15-month dollar downtrend. Some think tapering could be hastened, and the dollar boosted, if U.S. inflation runs hotter than the 0.4% monthly clip that economists expect. For the ECB, the focus is on any signs of an imminent slowdown to its bond buying programme. Both are due on Thursday and the anticipation has all but killed volatility in major currencies, as traders assume a wait-and-see stance. The euro ticked higher to $1.2191 by midday trade in London, while the dollar held firm at 109.47 yen . Deutsche Bank’s Currency Volatility Index (.DBCVIX) hit its lowest level since February 2020 on Tuesday, and sank further on Wednesday. The U.S. dollar index was parked at 90.005. “We look for a fairly calm day in FX markets today, ahead of the May U.S. CPI and the ECB meeting tomorrow,” said ING strategists Petr Krpata, Francesco Pesole and Chris Turner in a note to clients. The Australian and New Zealand dollars were firmly entrenched in narrow bands, with the Aussie at $0.7744, roughly the middle of the past two months’ range, and the kiwi travelling likewise at $0.7199. Sterling edged slightly higher, but remained stuck within recent ranges as doubt has crept in over whether rising cases of the coronavirus’ Delta variant in Britain could delay business reopening plans scheduled for June 21. It last bought $1.4168.   THURSDAY 10/6/2021 – DOLLAR EDGES DOWN AFTER INFLATION DATA, AHEAD OF FOMC The dollar index was down slightly on Thursday after alternating between losses and gains earlier in the session as investors digested elevated U.S. inflation and European Central Bank commentary while eyeing the U.S. Federal Reserve’s next meeting. After adopting a wait-and-see attitude all week, sucking volatility from the market and leaving major currencies mostly range-bound, Thursday’s developments appeared to add little new direction to currency markets. Earlier in the day, the ECB raised its growth and inflation views but promised to keep ample stimulus flowing, fearing that a retreat now would accelerate a worrisome rise in borrowing costs and choke off recovery. Then in the United States, data showed that the number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly 15 months, while consumer prices increased further in May as the pandemic’s easing grip on the economy continued to boost domestic demand. While emerging market currencies such as the Turkish lira showed more pronounced reactions, dollar traders were already cautiously looking ahead to the U.S. Federal Open market Committee (FOMC) policy meeting scheduled for next week.   FRIDAY 11/6/2021 – STERLING EDGES LOWER AFTER RECORD GDP FAILS TO IMPRESS The pound edged lower and was on course for its worst week versus the euro, with analysts saying data showing Britain’s recovery from the COVID-19 pandemic sped up in April was slightly disappointing. Britain’s GDP was a record 27.6% higher than a year earlier when the virus was rampant. But economic output remained 3.7% below its level in February 2020, before the pandemic led to lockdown measures. Sterling fell 0.1% to 85.97 pence at 0830 GMT and was on course for its worst week versus the single currency since late April. Versus the dollar, it was also down 0.1% to $1.4154, after falling to a one-month low of $1.4071 on Thursday. “UK GDP data release this morning, while strong, did not quite meet market expectations. Also, reports that the re-opening of the economy could be delayed beyond June 21 should limit enthusiasm for GBP versus the euro,” said Jane Foley, Head of FX Strategy at Rabobank. Prime Minister Boris Johnson wants to fully lift lockdown restrictions in England on June 21, helped by a swift vaccine roll-out that has brightened Britain’s economic outlook. But with the Delta variant of COVID-19 first detected in India spreading fast, Johnson has said the lifting of lockdown could be delayed. Sterling was under pressure this week after Britain and the European Union failed to agree on solutions to post-Brexit trade problems in Northern Ireland. It won back a little ground on Thursday as investors expected the Federal Reserve to keep its policy unchanged even after data showed U.S. consumer prices climbed; while the European Central Bank maintained an elevated flow of stimulus as expected. Sterling has also found some support from U.S. President Joe Biden’s key messages to Britain in his first meeting with Johnson, Rabobank’s Foley also said. They “were more about the special relationship between the U.S. and the UK and less about issues related to the N. Ireland protocol,” she said.