State of The Markets | Dollar Tumbled As Inflation Rise


Dollar tumbled as inflation rise. US stocks traded mixed on Tuesday as S&P500 (+1.05%) and Nasdaq (+0.33%) climbed higher while Dow (-0.20%) edged lower; after report of US inflation (2.6% YoY) registered the highest in two years. Dovish Feds stance on the interest rate, forced markets to reprice Dollar and the world reserve currency tumbled to 91.80 in the futures markets, against a basket of six major currencies. The benchmark US10Y yield fell further on the sentiment, around 1.62% compared to 1.67% on Monday.

Crude advanced further, broke the $60/bl barrier, after news hit the wire that China’s crude imports jumped 21% YoY. Investors seemed to shrug off the news on J&J vaccination pause. Capitalized on the rising inflation, gold closed higher, above $1,743.80/oz after $174 million worth of block orders hit the futures market. No selling pressure was observed at the $1,750 level.

FDA suspension of J&J vaccination program, after six women were reported to developed blood clots post inoculation, sent Yen further in the demand territories across the board, while short term traders were seen betting on the Kiwi as RBNZ stand pat in early Asian trading on Wednesday. King Dollar was seen on selling pressure as markets favored high beta Comdolls in the short to medium term accounts. Euro Sterling is trapped in a range, while long term outlook seemed bearish as risk sentiments fade further.

OUR PICK – A revisit to Crude Oil

Remain bearish below $61.50/bl. In early April we picked Crude, as we observed selling pressure below $62.00/bl (read here) and our sell limit was filled. Today, price advanced further to $61/bl on news that China crude imports rose 21% YoY and Dollar weakness. We see this news was reflecting the past and markets is simply repricing the black gold as the rise from $60 to $61 was not accompanied by rising money flows. With refineries maintenance season is around the corner, where purchases slowed, plus the new demand concerns amid J&J vaccination pause; we remain bearish as long as price closed below $61.50 – monthly pivot.


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