Juliana Calil
05/12/2021
Highlights
Inflation in the USA in April 2021 was 4.2%, above the market estimate of 3.6%. This was the highest monthly readingsince September 2008, the month of Lehman Brothers’ bankruptcy. Prices are under pressure from the scarcity of raw materials,increase in commodity prices, fiscal and monetary stimulus that injected trillions of dollars into the economy in the last fewmonths, and the spirits of consumers and entrepreneurs regarding the resumption of normal post-pandemic life. The biggest increaseswere registered in gasoline (49.6%), fuel oil (37.3%) and used cars and trucks (21%). Inflation decelerated byhealth care services (2.2%) and food (2.4%)
Across the Atlantic Ocean, in Europe, the vaccination campaign against COVID-19 has finally picked up pace and countries have alreadythey begin to feel the breeze of the economic recovery there. The European Commission has revised its 2021 GDP forecasts upwardsand 2022, to 4.3% and 4.4% respectively. The Commission further stated that all Member States in the bloc will see theireconomies to return to pre-crisis levels by the end of 2022.
In response to this scenario, European stock markets closed higher on Wednesday. In the USA, the Dow Jones, the S&P 500 and theNasdaq ended with steep drops. The liquidation was more pronounced, especially among companies in thetechnology, with the prospect of higher interest rates threatening to undermine the valuation of these companies, as projections oftheir results considers a longer term.
EURUSD, which opened the session at 1.2145, plunged to 1.2070 at the time of the release of US inflation, returned to1.2140, and from there it depreciated to the level of 1.2075, where the session should close.
Was it just a quick retreat in the bullish trend or the beginning of a bearish trend?
The macro scenario indicates that the USD will continue to lose value in the coming months, which would increase the value of EURUSD. At theHowever, the ForEx market needs yet another signal to finally make a move beyond the extremes observed untilnow. In the last four months, buyers have encountered a systematic bearish pressure approaching 1.2180. Morea signal and that resistance could finally be broken.
Senior FED members repeatedly claim that they will not raise interest rates or reduce monthly purchases ofuntil inflation remains at around 2% for a long period. They also argue that the increase observed today is the result offrom a very repressed base, from the moment when the country was hit by the pandemic, and that, therefore, does not mean losspurchasing power of the US currency.
DXY is trading at a high of 90.7. The USDJPY is oscillating close to $ 109.6. The USDCHF of $ 0.9088. Gold isbeing traded at $ 1,816 an ounce, and silver at $ 26.9.
The main facts observed by investors at the moment are:
MACROECONOMY
UK GDP shrank 6.1% in the first quarter of 2021 compared to the same period in the yearprevious. Household consumption fell 10.4% and fixed investment fell 3.7%. Meanwhile, exportsfell 12.2% and imports fell 13.6%. Public investment, however, grew by 4.8%, the highestsince the second quarter of 2019. The UK GDP in this first quarter was 8.7% lower than thefourth quarter of 2019, before the pandemic hit the country.
Industrial Production in the Euro Zone in March / 2021 increased 0.1% in relation to the previous month, belowmarket expectations of a 0.7% growth. Increases were observed in the production of goodsnon-durable consumption (1.9%), energy (1.2%) and intermediate goods (0.6%), compensating for the declines inproduction of capital goods (-1.0%) and durable consumer goods (-1.2%). In relation to the previous year, theindustrial activity increased 10.9% in March, the largest increase ever recorded, despite being below themarket forecasts of 11.6% growth.
Mortgage applications in the US increased 2.1% in the week ended May 7, 2021 compared toprevious week, the first increase in 3 weeks as rates fell. Requests forrefinancing of real estate loans increased by 2.9% and those for the purchase of a home increased by0.8%.
MONETARY POLICY
Richard Clarida, vice president of the FED, returned to move the market with his statements. However,this time, he defended the Institution’s thesis, noting that the Payroll was much lower than expected and inflationwell above the estimate did not change the EDF’s view on maintaining its current ultra-policyaccommodative.
10-year US Treasury bond yields rose to 1.6916%, anhighest of the past 4 weeks, after this afternoon’s $ 41 billion auction was met with demandenough. The $ 58 billion 3-year bond auction that took place yesterday went well, andtomorrow the auction of $ 27 billion in bonds with a maturity of 20 years takes place.
Source: http://wintrademarkets.com/
