Market Update 11Jun2021 2

Weekly Market Update 11 June – Dollar outperformed most of the major currencies, FOMC in focus next week

Weekly Market Update 11 June – Dollar outperformed most of the major currencies, FOMC in focus next week

1. Dollar strengthened against most of its peers following a stronger than expected reading in the recent CPI and consumer confidence data, buoying demand for the USD, ahead of the Fed’s monetary policy meeting. Despite the Fed repeatedly downplaying the risks of higher inflation while assuring investors of their commitment in maintaining an accommodative monetary policy stance, there are increasing expectations that the Fed will be forced to taper asset purchases as inflation runs hotter. Looking ahead, we could see the Dollar extend its recent rally as investors await the central bank’s latest view on inflation. The market remains divided on this topic, with a few policymakers citing that the rising inflationary pressures are transitory while others warned of the need to consider a shift from its dovish stance to curb this. Elsewhere, key economic releases to follow include retail sales, producer price index, industrial production and unemployment claims data.

2. Across the Atlantic, Euro pared recent gains as the recent European Central Bank’s (ECB) monetary policy meeting did not mention any plans to taper asset purchases despite them upgrading their inflation and growth projections for 2021 and 2022. Meanwhile, the ECB is also adopting a more data-driven approach, where they are looking at persistently high inflation numbers before considering a shift away from their current dovish stance. Looking ahead, it will be a quiet week for the Euro as we are not expecting any high impact Eurozone economic data in the coming week. Euro could extend its decline, taking cues from a stronger dollar as investors positioned themselves for the FOMC meeting ahead.

3. Sterling dipped as the country grapples with the rising number of Covid-19 cases along with a potential delay in the reopening of their economy. Looking ahead, Pound could remain under pressure as Britain and EU struggle to come to terms over the implementation of the post-Brexit trade deal in Northern Ireland, with both countries agreeing that they will continue to find a solution before the end of this month.

Salzworth Asset Management