Hey ladies and gents!
Another trading week has been and gone. Not too many trades taken on our side but trading is like fishing. We sit there patiently just waiting for the right fish to come along so to speak. Next week in the UK, China and Japan there are Bank Holidays. Expect the London session to have less volatitlity than normal. So what happened this week? What were the headlines? Let’s take a look.
Late on Sunday in the UK Bitcoin looked heavy as it took a sharp drop crashing below 49,000 USD and finding buyers just above the 47,000 USD level which was a seven week low.
The coin took a hit the previous weekend and throughout last week never managed much of a recovery, it was more or less sideways through to the Friday when it dribbled lower again. While we are focusing on BTC here in this post the fall was wider spread across the crypto complex as well (unsurprisingly). By Wednsday Bitcoin recovered very well as it touched the 56,500 USD level which in fact was the highest price it has been this week with price currectly floating at 54,272 USD as we approach month end.
On early Tuesday morning in the UK, the Bank Of Japan announced no change to monatery policy as widely expected.
The short term interest target was kept at -0.1%
- 10 year JGB yield target remains around 0%
- ETF buy cap stays at 12tln yen
- real GDP median forecast for fiscal 2021 at 4.0% vs +3.9% in January
- real GDP median forecast for fiscal 2022 at 2.4% vs +1.8% in January
- real GDP median forecast for fiscal 2023 at 1.3%
On the inflation front (the BOJ target is 2%)
- the BOJ said it expects core consumer inflation to hit 0.1% in the current fiscal year that began in April (0.5% was projected in January)
While GDP was forecast higher (based on a successful vaccine rollout) the forecasts for CPI were cut (again). Comments on ongoing financial stability are supportive of continued easy policy.
Meanwhile USD/JPY barely changed, circa 108.28.
On Wednesday we had Australian Inflation data. The CPI for the January to March quarter of 2021 was 0.6% opposed to a predicted 0.9%. The price of AUD/USD dropped initially but soon recovered during the London session and made it’s way back to the highs of 0.78100 where the market is finding it hard to break higher (3 rejections of this zone since 20th April as shown in the chart below).
Also on Wednesday (7pm UK time) we had the Federal Reserve Statement. The highlights were
- Fed funds rate unchanged at 0.00% to 0.25% as universally expected
- “Amid progress on vaccinations and strong policy support, indicators of economic activity ad employment have strengthened”
- Inflation rise largely reflects transitory factors
- The sectors most adversely affected by the pandemic remain weak but have shown improvement
- The ongoing public health crisis continues to weigh on the economy, and risks to the economic outlook remain
- Repeats guidance that “The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time”
- QE will continue at $120B monthly pace
- Repeats that “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals”
The early market reaction was modest US dollar selling. Some of that is a continuation of what we saw in the run-up to the decision. Since then the Dollar Index has made some small gains from it’s low of the week at 90.424 to a current price at time of writing of 90.79
From all of us at Trade & Train, have a lovely long weekend and if you are here in the UK enjoy the Bank Holiday.
All the best… T & T.