English (India)
22
Oct

Services/Manufacturing PMI, Canadian Retail Sales, Bitcoin off ATH

calendar 22/10/2021 - 08:09 UTC

While the dollar recovered some losses on Thursday, leading to the EUR/USD rate falling as low as 1.162, by Friday morning the dollar was again seen weaker. Many USD-EM pairs were trading clearly higher on Thursday but by Friday morning pairs like the USD/MXN and USD/RUB retraced most of the previous gains. The USD/ZAR pair meanwhile remained elevated after it climbed as high as 14.7 on Thursday.

Major cryptos traded moderately lower from the all-time high seen on Wednesday in Bitcoin markets, with the biggest cryptocurrency by market cap trading at times again below $63k, which served up until this week at times as a resistance level. Still, most major cryptos with few exceptions like Ripple, are still trading up on a rolling weekly basis. Ethereum meanwhile started to recover against the dominance of Bitcoin, with the Bitcoin/Ethereum rate falling significantly over the past two days closer to the low from a week ago.

In the equity markets the sentiment was a bit mixed. Major indices in the United States like the US 500 and US 30 continued to move higher, while in Europe the Germany 40 traded once again almost unchanged on Thursday but then started trading higher by Friday morning, while the Italy 40 with its continuously positive performance over the past few days is at a new two months high, moving closer towards the previous all-time high around 26,700.

On Friday manufacturing and services PMI figures will be published for the EU, Germany, France, the UK and some other regions. From Canada retail sales numbers for August can be expected.

USD/TRY

One of the biggest moves in the FX market on Thursday was clearly the USD/TRY pair, which reached once again a new all-time high and continued moving higher by Friday morning with the pair up since the beginning of the month by more than eight per cent, which would be a rather uncommon move for stable currency pairs. Of course, the lira cannot really be considered to belong to such a category of currencies as the high rate of inflation as well as the increased level of government intervention in the monetary policy of the central bank are factors seen as culprits in the recent devaluation. The Financial Times quoted an important former figure in the government of the current Turkish President indicated that the central bank acted “under orders”. Just recently the three people in leadership positions at the central bank have been replaced.

While it is understandable that the political leadership wants to spur growth by drawing on cheaper credit, the rate cut by 200 bp to an interest rate of 16% brings it further below the last CPI numbers which showed 19.58% annualised price growth, which technically means that the rates provide even more negative real return.

USD/TRY

Gold

Gold prices continued rising by Friday morning, moving the precious metal on track to close for the second week in a row higher and getting again closer towards the $1,800 mark. Silver prices meanwhile are set to end the week higher for the fourth time in a row, while stabilising on Thursday after reaching a new six weeks high.

Platinum prices meanwhile also continued to move higher, while palladium retraced lower, at times trading below the $2,000 per troy ounce threshold.

Gold prices could be in theory influenced by the developments of the money markets and expectations for inflation rates. Still, the rise of for example the 10-year US T-Note yield to levels around 1.70%, which is the highest since May, should have been in theory negative for long-term gold investors as that could be seen as forgone yield income or opportunity cost of holding the precious metal. The uncertainty about the future interest rate policies of central banks, especially the Federal Reserve and also rising inflation which might or might not be transitionary make it tough for investors to see if gold is a good hedge against such risk at this time or if other assets would deliver better performance.

Gold

WTI Oil

After oil prices rose intraday to a new high since 2014, with a barrel of WTI crude oil in the December futures contract trading only marginally below $84, a retracement in the hour after the US markets reopened pushed oil prices significantly lower. Natural gas prices meanwhile traded at the end of the day almost unchanged after also experiencing some intraday volatility.

Still, oil prices remain significantly elevated compared to the levels common over the past months and even years. The reluctance by countries organise in OPEC+ to increase production quotas coupled with ever falling stockpiles like in the Cushing hub are factors that are helping to maintain oil prices at high levels.

On Friday the U.S. Baker Hughes Oil Rig Count will be published. The number of reported operating oil rigs has been continuously rising over the past six weeks, reaching the highest level since April 2020. Still, even with this recovery the statistic is still far below the activity recorded pre-COVID.

WTI Oil

US 500

The US 500 index closed once again higher and was on Friday morning on track to move up for the fifth trading day in a row as the index is edging ever closer towards the all-time high recorded in early September.

Shares of Snap were trading at the end of the after-hours session down by more than 21 % with the company significantly disappointing investors with its quarterly results. Besides the relatively upbeat daily active users number of 306 million, the company’s revenue and earnings as well as the outlook to earning revenues of $1.17 bn. - $1.21 bn. in the following quarter were seen as quite underwhelming by investors.

Intel shares also plummeted on negative earnings by more than eight per cent in the late session as the company missed revenue projections but managed to beat adjusted EPS estimates by delivering $1.71 earnings per share thanks to improved gross margins of 57.8%. The outlook that margins, revenues and earnings would be lower in the fourth quarter with an estimated EPS of $0.90 did also not sit too well with investors.

On Friday companies including Honeywell, American Express and Schlumberger are set to publish their respective quarterly results.

US 500

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