This Week In Markets: 21st - 25th June 2021

Okay, very good morning. It is Monday, 21st of June. Hope you are doing well. And just a quick summary of what I'm going to cover, which is a kind of wrap-up of the weekend's major news flow, and then we'll look at the major highlights for the week ahead. Very much going to kind of focus on the fundamental side of things, so I'll just give you a quick flavor in a moment of the overall charts and what we look like at the open. So sentiment-wise this morning, but I'll leave that for the more detailed technical look in the Amplify Live community. Remember, if you're watching this on YouTube, really appreciate it if you could like and subscribe to the channel if you've not already done so. And then, as I always say, that if you want to get this briefing early every other day of the week, then you can just check out AmplifyLive.com. But look, let's get straight to it and let's talk about the charts this morning. And the market's still very much in a little bit of digestion of what happened from the Fed both middle of last week and also those surprisingly hawkish comments that came out from James Bullard, of course, which moved the markets on Friday. So in terms of the Asia-Pacific session, stock index futures actually did move lower, typically lower trade across Asia overnight. But as Europe has come into the market, just seeing a little bit of reprieve here to some of that downside pressure. And going from the center left to right, the DAX future, NASDAQ, and the S&P just coming up a little bit from what otherwise was, was lower trade seen overnight. Elsewhere then, the dollar just softening a touch but really trading around unchanged. However, with the DXY, it's worth just keeping an eye on the kind of range from the Asia-Pac session and also late in the US session because we're at the lower bound of that at the moment. The DXY currently trading at 92.22. So So just as well, giving a slight lift to the major pairs. You can see here EURUSD just coming up to its range high that we were trading with the footprint kind of printing down from the low post the Bullard comments and then overnight the Asia-Pac session on the lower bound. On the upper bound of the range high, we've also got the pivot today just coming in close proximity to the current price. And then as far as cable is concerned, pretty similar as well. A little bit of softness in the dollar just helping it just pull back up and be keeping on that 1.3831 here, looking at sterling futures, which is that double top that we had from the overnight APAC session and late in US trade on Friday. Otherwise, oil, um, just remains fairly elevated. We're kind of in this 70-72 band from a slightly higher time frame perspective on this multi-year high that we've been trading. And I've got an update on Iran from the weekend's press that I can get you up to speed on. And then in terms of T-notes, quite interesting move. In fact, this is looking at the US 10-year, and given the downward move that we saw on that surprise announcement with the move to 2 rate hikes in 2023 on the dot plots and some of the inflation comments, all of that move has been taken back. And actually, in fact, even though it outperformed a little bit yet in the Asian Pacific session, if you look at where we're trading right now look at where we were trading prior to the Fed announcement, we are absolutely flat, exiting out some of the, the large swings in price action that we have seen. So what we're seeing a little bit in the yield movement is higher yields in the short end and slightly lower in the long end, uh, that's creating some of this curve movement at the moment on the back of some of the more, um, the kind of fears about near-term tightening and further exacerbated by the Bullard comments that we had at the end of last week. And on that point, I just wanted to start off on the new— the news side of things is looking at this FOMC table, this kind of hawk-dove view, which is particularly important for any trader to, to understand and be aware of, of course, to ascertain the potential reaction that a certain comment from a certain speaker could have on the underlying price of different products. And Bullard ultimately is now probably bumped further down, uh, towards the very most extreme bottom end of this list, otherwise sitting quite center. And, you know, quite a lot of questions about Bullard at the end of last week. And as I said at the time, in a kind of sign-off to some of our summer analysts, Bullard is probably one of the outline characters who does tend to jump around this kind of dovish-hawkish spectrum, dovish being at the top and hawkish being at the bottom, which is, which is very unusual in fact, because as we know, central bankers are always very cautious, very calculated with what they say, given that they are fully aware of the impact that their comments could have on the market. So a couple of points with Bullard was that one, he isn't a voting member at the moment, but I think the markets are willing to look beyond that point. Point, just particularly because of the fact that he is going to be voting next year. And that's really when things from a policy, um, real perspective start to start heating up. So tapering commencing and perhaps at the beginning of that year, as far as he's concerned. Also rate rises happening in that year as well, of which he will have the ability to vote on, on policy. So people kind of forward-looking in that sense. Um, a lot of people as well criticizing Bullard, which I think is perhaps a little bit inappropriate. As I've just previously said, I know he does flip-flop and change his view quite often, and more so than normal, which does also bring into question his credibility. But what I would say is that for me, um, that actually provides quite interesting, um, communication tool perhaps for the committee to have someone who's quite outlying who can then kind of re-instill perhaps the more hawkish tilt that the Fed wanted to convey last week, because underpinning one of Bullard's comments was that there is still upside risks to the economic kind of recovery, given the fact we've still got quite a lot of reopening to do, which I don't really disagree with. So perhaps he gets used, is what I'm saying, as a way of— given that he's a non-voter and given the fact that people are aware of he tends to jump around in terms of his view, It just allows the Fed to have someone who they can put out there, say something that can kind of get into the heads of the psyche of the investment community without them really tampering with the official view at this point in time. Of course, the timeline we're still looking at is, is really Jackson Hole, the end of August, for the next meaningful event when we're going to get an update on, on policy views. So that was Bullard. We have had Kashkari, who, as you can see here, is the most Dublin member, or considered to be, and is a voter not until 2023. So he's a bit late to the game really, and so his comments probably watered down, diluted to a certain degree for that matter. But Kashkari, no surprises there. But in context, coming after the very hawkish comments from Bullard, Kashkari said at the weekend the Fed's interest rate should remain unchanged at least through 2023. So he would have been one of those Anonymous dots who would have stayed unchanged at basically flat, looking for rates not to rise, not in 2020, but after 2023. You're going to get a lot more of these guys speaking throughout the week, and it's obviously going to garner a lot of attention just given the context of what's happened last week with the, with the rate decision from the FOMC and Bullard. Powell, of course, the most important, the Fed chair, does speak on Tuesday before the House Select Subcommittee on the Coronavirus Crisis. And the Fed's policy response and also the state of the economy. So that's going to be a big one, of course, because if we— I mean, we have seen some pretty sizable moves in the market across the board, and that's going to be quite key to see then, does Powell need to kind of move the needle again? Does he feel like the markets are on point with what they're trying to communicate? So that'd be quite an important speech, and that's coming Tuesday. You've got the likes of Williams speaking today, Daily Mester on Tuesday, Bostic and James Bullard again do speak later on in the week, of course. Excuse me. Otherwise, let's just take a quick look at what else is going on and going to start off with looking at the situation with EU and COVID because at the moment As I'll show, vaccines— Europe's been having a pretty good performance of late, trying to just close the gap. And you'll see this visually in a moment. But one of the main things that's come up in the FT's analysis is the fact that the coronavirus Delta variant, which of course has been the main focal point here in the UK, has started to emerge and become more dominant in the likes of Portugal and has appeared in clusters in the likes of Germany, France, and Spain, which has prompted European health officials to sign start commenting about potential action that might be needed to slow that spread if it becomes materially worse. And so a couple of things here. This is looking at the different countries, and the top left being the UK, where 98% sequenced cases are now the Delta variant. This is much lower at the moment in the case of Europe. Italy 26%, Germany 15%, France 6.9%. But the point is, is that these numbers are moving up, whereas generally other more total case rates in those areas had been moving down. So the point being is that the Delta variant, as we know, is, is much more transmissible. And as we're seeing in the UK, it's kind of a race between how quickly can you get the population vaccinated against then the speed of which the spread of this Delta variant starts to pick up. And on that point, the UK continues to be somewhat of a front-runner on that regard. But Europe pretty much up to where the US is now, certainly if you're looking at the cases of like Italy, for example. So after this massive divergence that we saw through Q1 going into Q2 of this year between the likes of the UK and Europe, Europe's doing a pretty good job of picking up pace now on that. Vaccination front. So at the moment, I guess the way I'd interpret this Delta variant news is basically it's something I'm aware of and it's something I'm monitoring in terms of how quickly do these rates start to pick up in mainland Europe, with the ultimate purpose being if it is rapid and starts to be at a point where it's going to start influencing governments' decisions about national timings of the reopening of their economies. If it starts to delay that, then obviously that's going to have knock-on implications for the overall eurozone economic performance, particularly if we're talking about the likes of the biggest nations like Germany, France, Italy, Spain, so on and so forth. So for now, not so much a thing, but this Delta variant undoubtedly is probably going to be the variant that which will comprise of the biggest spread of global COVID. It's just about the, the how quickly we can get on top of it through the vaccination process, and then subsequently whether or not it impacts the, the economic picture. Otherwise, the other thing to mention over the weekend was Iran. You might have read or heard about this, where Western officials have warned Tehran that negotiations to revive its nuclear deal could not continue indefinitely. Remember, this has continued to roll over pretty much from week to week at this present point in time. And the sides have called a bit of a break in, in conversations for the time being following the Iranian election at the weekend. That comes after Ebrahim Raisi, a hardline and fierce critic of the West, won Iran's presidential election on Friday. And two diplomats since then have said that they expect a break of around 10 days. Raisi, or Raisi, I'm sure I'm saying his name incorrectly, I'll have to check. But for the purpose of this briefing, he's going to take office in early August, and there's— that's quite an important timing associated with that. And the main point being is that some Iranian officials have suggested that Tehran could have interest in pushing through an agreement in regards to brokering some kind of deal with the West on their nuclear capabilities before the new president takes office then in later in the summer in August, as to then if anything were to go wrong, deflect blame for any concessions onto his predecessor, Rouhani, of course. So it could be a tactical move there where they'll look to get the deal done in order to start off fresh with the new leadership and just passing the blame on to the previous. So just to keep an eye on at this point in time, I wouldn't be looking for any comments immediately as they, they let the dust settle on the elections for now. But we'll be keeping an eye on that rhetoric as it goes through the week. Bitcoin, a bit of a talking point over the weekend. Price-wise has come under some selling pressure, as you've probably been aware. Just having a quick look at it here, flip over. This is looking on a daily on the Bitcoin— this is Bitcoin futures, I must stress. But just looking where we are at the moment, and we're just having a— we've just moved below the 200 DMA at the moment, which as you'll remember we briefly broke but obviously sharply rebounded off during that May 19th kind of intraday crash in crypto that we saw. And then we, we saw that again through the 8th of June Before then, a pretty strong reversal back up to $40K, and we're back down there again at the moment. So the latest here with, with Bitcoin is kind of focused on this hash rate in China dropping significantly as Bitcoin mines are being closed and amid potential regulatory scrutiny. So the latest that's been talked about over the weekend is the city of Xi'an in the southwestern region of Sichuan has promised, or has promised the provincial authorities to root out all Bitcoin and Ether mining operations within one year, according to a person familiar with knowledge of the situation. According to the report, the Communist Party-backed Global Times newspaper has said the closure of many Bitcoin mines in the province has resulted in more than 90% of China's Bitcoin mining capacity being, being shut at the moment. For context, around 65% of the world's Bitcoin mining is said to take place in China. This is as of April 2020, according to a study and estimate out of the University of Cambridge in the UK. So really shows how impactful it can be if there is regulatory implications, um, and also then knock-on consequence for, for Bitcoin mining happening specifically in China. And this has been a weighted impact or story that has been weighing on price for some time. But Bitcoin, well, as you can see here in the top right-hand corner, is hitting fresh lows as we speak. Downside, you've got the 8th of June low that pretty much comes in just ahead of $30,000, so around $31,000. Then you've got that bottom of the May 19th move, which was also the low on the 29th of Jan. So that $30K is really downside target of significance. But But beyond that point, $27K brings in that double bottom from late Jan. And then further down through $25K, $22.5K is around the peak that we saw before the real sharp acceleration of price that we had going in post the kind of Christmas period into the new year. So definitely one to watch this week. Bitcoin never far away from seeing as that's what's quite regular for that product, fairly volatile price movement. Quick look at the calendar for the week ahead. Uh, today's pretty quiet, but there are definitely a couple of key things I'd be looking out for. European Central Bank President Christine Lagarde does speak in European Parliament later today, but I wouldn't be expecting too much from her, to be honest, but just making you aware. Otherwise, as far as the calendar is concerned, things really start to pick up on Wednesday when we get the latest flash PMI numbers. Now what we're looking out for from those are from the eurozone. The May report was characterized by a notable jump in the services PMI as the, the nations within the region started to kind of unlock and started to reopen. This time around, further lockdown easing is expected to support the service side of the prints for the PMI, albeit to a lesser extent that was seen last month. On the manufacturing front, activity like to remain elevated despite some of the bottlenecks that are being faced on the global supply chain front at the moment. We'll also on the same day, of course, get the UK flash PMIs on Wednesday, high-frequency indicators. So something, of course, in this new pandemic era that people look at, particularly on, on service measurements. So footfall, restaurant bookings, credit card usage, these types of things. They generally have improved in late May and early July, uh, as far as the UK is concerned, as a potential precursor for what this services PMI might look like. And of course, that's much more important than the manufacturing side when we're looking at the UK. But the recent 4-week extension to the last phase of that final unwinding, if you like, of the current lockdown in the UK, um, might impede then some of the shine off that data. So even if it is possible ultimately we have not yet, as we were previously scheduled, reopened. And that obviously is going to slightly moderate any future readings coming forward that will be measuring the month of June— well, for this reading for, for June, I should say. Otherwise, on Thursday you've got a couple of different things. German IFO is coming out, and that's expected to build on on, on what we have seen is quite a decent increase in German business morale of late. In fact, last month it was tracking its highest levels since May of 2019, and it's expected to see a further uptick this week. But I don't for the moment kind of see that as too surprising. However, of course, with that Delta variant now present in clusters in pockets of Germany, that's going to be quite key to see whether they can continue that reopening momentum. Um, you do also have the Q1 GDP coming out of the US, but this is the final reading, so expected to be unrevised at 6.4%, and I would say quite largely as a non-event for that purpose. You do have the Bank of England decision though this week, so following on from the likes of the Fed, we got the BoE. What can we expect from them? Well, really not a great deal at all, so not expecting any change in policy on either the rate or the asset facility in terms of their QE program, the AFP. The decision though on their QE program could well see some dissenting members, particularly that of Haldane, the chief economist, who obviously is outgoing. He departs from the bank at the end of this month, but he's been very much of the opinion, even so to the point that he voted last time, they should in fact be stopping the QE program at this point in time. So expect him to dissent. Has he managed to persuade anyone else to jump in his, his hawkish camp? Perhaps not, but that'll be something to keep an eye out for when that decision comes out on Thursday. But overall, probably not the most exciting thing that we're ever going to see from the Bank of England. And then moving on to Friday, probably one of the main data points of the week, we get the core PCE price index from in the States. This is for the month of May. In April, the month-to-month measure climbed 0.7% from the previous month and delivered its biggest year-on-year jump since the 1990s at 3.1%. So although the Fed have said— and we've seen this in those Summary of Economic Projections— where they are and have seen inflation a little bit more— pressures larger than they thought. But the kind of dot plots or the, the matrix showed that they see them— inflation peaking and then decelerating going into 2022 and 2023. So although this transitory view remains firm at the moment, of course these types of numbers, particularly their preferred measure like PCE, is always going to be closely watched when it's up at these levels. So that's going to be something particularly interesting to, to keep an eye on. Personal income spending, and then the final reading, University of Michigan, also due on the Friday. And that is it. So I'm not going to go any further than that for the time being. You can just jump on my, my Twitter account. Feel free to follow me. I distribute a morning note, morning call every morning. And then otherwise, any questions, I'll see the guys in the private chat room on Amplify Live. All right, have a good day and a great week ahead. Thanks very much.