Market Commentary – June 18, 2021

Kevin Jock

18th June 2021

Mixed performance across Wall Street following Wednesday’s FOMC meeting. Nasdaq shrugged off expected rate rises in 2023 to surge 1.7%. The S&P500 closed flat, whilst the Dow Jones slipped 0.4% largely from an unexpected spike in unemployment claims. Across the Atlantic, European benchmarks recorded new all-time highs and is expected to post 4 consecutive weeks of advances. In Asia, profit-taking saw the S&P200 and Nikkei drift lower throughout the session. This despite the BOJ extending their pandemic relief program by 6-months. The Hang Seng bucked the trend to rally 0.6% on open.

Crude oil fell back below $71 as the US dollar rallied strongly for two consecutive sessions among developed counterparts. Expected as costlier crude oil of the US would unturn offset rising global demand. Meanwhile, taper tantrum spoiling the inflation risk premia in gold left the metal much less to be desired, tumbling 2.1% on Thursday. Bitcoin though, not immune to cross-currency contagion has edged lower to below $38,000.

Feds tapering plans does not bode well for exotic currencies, particularly the Turkish lira and Chinese yuan. Both currencies overshadowed by varying forms of political and regulatory ideology that may contradict the direction dictated by natural market forces. The USDTRY rose another 1.3% on Thursday, alongside reluctance from Turkey’s central bank in increasing interest rates to fight inflation has the currency now sitting at all-time highs. Following indirect PBOC intervention of recent days, the USDCNH rose above 6.4000, a monthly high. Bringing in rate rises by the Federal Reserve, could derail the PBOC’s plan for a steady and stable depreciation in the yuan.


Figure 1 (Source: IS Prime) XAUUSD Daily : Gold tumbles to $1,773 amid taper tantrum hosing down inflation risk premia in the precious metal.

Headliner to Review

  • As expected, the BOJ keeps monetary policy stead, targeting 10-year treasury yields at 0% whilst short term interest rates at 0.1. Given the slowdown in economic growth for the first quarter due to a resurgence in COVID-19 cases, the central bank has extended their pandemic relief program by 6 months. Likewise, the SNB is also maintaining their expansionary monetary policy.
  • Unemployment claims out of the U.S. came in worse than expected, spiking from 375K to 412K when a drift lower to 360K was expected. The claims largely came from two states, Pennsylvania and California.

Headliner to Watch

  • Aussie retail sales out Monday, expected to remain in positive territory following a return to normality despite the occasional flash lockdowns.

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Antony Tan
Kevin Jock