Weekly Market Wrap 07-Jun to 11-Jun 2021

Marius Paun | London, UK | Senior dealer | Friday 11th June 2021

The ECB Keeps Rate Unchanged

We start this week’s wrap with a strange bit of news. On Tuesday the 8th, multiple major websites were down; Reddit, Twitter, Amazon, CNN, PayPal, the UK Gov website gov.uk, among the best-known ones. The outage was traced to an error in a content delivery network run by Fastly. It made the affected websites inaccessible for more than an hour.

Meanwhile, the major US indices stayed close to their all-time highs with S&P 500 actually reaching a fresh record of 4249.8 yesterday. At the same time, the US 10-year yields fell to a one month low under 1.50%.

The US President Joe Biden spoke with senators on both sides of the political spectrum and urged them to carry on negotiations on an infrastructure deal. But Senator Capito said talks between Biden and Republicans have in fact stopped and that no agreement has been reached.

We had the inflation data from China coming out and showing CPI rising 1.3% y/y vs 1.6% expected with food prices seen as falling especially pork. On the other hand, PPI was 9.0% higher, the fastest rise since 2008 vs 8.5% consensus, impacted by rising commodity prices. So, for the moment PPI did not flow through CPI this month. In reaction, China’s state planner promised to intervene to keep inflation in check for certain goods.

The European Central Bank left its benchmark interest rate unchanged in their June monetary policy meeting, as widely anticipated. It added that PEPP will continue through at least the end of March next year, it reaffirmed the size of PEPP at 1.85 trillion euro, purchases to continue at 20 billion per month. The ECB also added the rates to remain at current levels or lower until inflation gets close to but below 2% target.

Bank of England’s Governor Andrew Bailey said they have not made a decision on a central bank digital currency as his team is still exploring the ‘opportunities and risks of CBDC’. He also remarked that the overall impact of digital money on lending rates and credit provision is modest. Elsewhere the UK Times reported that Prime Minister Boris Johnson is considering a 4-week delay to the reopening, initially scheduled on 21st of June.

The US oil prices moved above $70 per barrel earlier in the week as the US sent a statement to Iran to ‘Refrain from taking further steps that violate the nuclear deal’. The price continued its rally this morning reaching a high of $70.88 before retracing slightly to $70.5 going into the weekend.

Gold prices posted a selloff for the second week in a row. It appears that the $1910-$1920 handle which acted as resistance since 2009 is proving a struggle to overcome. So far, any attempt to push above it was unsuccessful, triggering a selloff.

Bitcoin made headlines again this week with one of those bombastic announcements. El Salvador President said he may make the cryptocurrency a legal tender, the first country to do so. President Nayid Bukele made the announcement last weekend, speaking at a conference in Miami, Florida. Bitcoin seems to have entered a consolidation phase around $35,000 mark after the sharp dive seen a few weeks back.