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February 16th - Some staunch gold bulls are unfazed by the historic pullback in the precious metal, still anticipating a renewed surge to unprecedented levels. In late January, New York gold futures prices briefly broke a record high of $5,600 per ounce, only to suffer an unprecedented plunge the following day. During this period, one or more investors began buying December-expiring call option spread contracts with strike prices of $15,000/$20,000 on the COMEX division of the Chicago Mercantile Exchange. Even after gold prices consolidated around $5,000, this position continued to grow, now reaching approximately 11,000 contracts. "Its truly surprising to see so many deep out-of-the-money call option spread open interest after a technical pullback," said Akash Doshi, global head of gold and metals strategy at State Street Investment Management. "Some traders may see this as a cheap lottery opportunity."Market news: According to Bank of Americas latest foreign exchange and interest rate sentiment survey, market sentiment towards the US dollar in February was at its most negative level in 14 years. Currently, short positions in the US dollar have reached their highest level since January 2012.February 16 – Russian Deputy Foreign Minister Sergei Ryabkov stated on February 16 local time that the Russian delegation will travel to Geneva on the evening of the 16th (Moscow time) to participate in the Geneva negotiations on the Ukraine issue, in accordance with the consensus reached during the meeting between Russian and US leaders Anchorage. Russia believes that any agreement reached on the Ukraine issue must be lasting and guarantee the elimination of the root causes of the conflict. He also pointed out that the main security threat to Russia at this stage comes from European countries holding a confrontational stance.February 16th - With the Federal Reserve poised to release a highly anticipated bank capital proposal related to Basel III, U.S. lending institutions may face new mortgage requirements. Michelle Bowman, the Federal Reserves chief banking regulator, stated that this new measure related to residential real estate will consider increasing the "risk sensitivity" of mortgage capital requirements on banks books. One approach is to use loan-to-value ratios to determine the applicable risk weights for residential real estate exposures, rather than using a uniform risk weight. "This change could better align capital requirements with actual risk, support on-balance-sheet lending by banks, and potentially reverse the trend of mortgage activity shifting to non-bank institutions over the past 15 years," Bowman said.The British government has abandoned its plan to cancel local council elections.

USD/TRY reestablishes its annual high on route to 17.00, notwithstanding Erdogan's expectation of future inflation moderation

Alina Haynes

Jun 06, 2022 15:25

 截屏2022-06-06 下午3.23.52.png

 

In spite of Turkish currency (TRY) traders' inflation worries and President Erdogan's efforts to appease TRY purchasers, the USD/TRY continues to trade near $16.36, the highest level since 2022. The pair's upward momentum is influenced by Friday's high Turkish inflation data for May, as well as the US dollar's comeback over the last week, not to mention expectations of the Fed's faster/more aggressive rate rises.

 

According to Reuters, "Turkish President Tayyip Erdogan stated on Sunday that inflation numbers from the month of May, when annual consumer prices soared to a 24-year high, indicate that inflation is now on the down." It is noteworthy that the May inflation rate for Turkey increased to 73.5 percent in the most recent report.

 

Reuters also reported that the lira fell by 44 percent last year and has been the poorest performer in emerging markets for several consecutive years, mostly owing to economic and monetary policy worries under the administration of President Tayyip Erdogan.

 

In contrast, the odds supporting a 0.50 percent rate hike by the Federal Reserve in September have lately increased to 75 percent from 35 percent a week earlier, which emphasizes this week's US Consumer Price Index (CPI) data and favors US dollar purchasers. In spite of this, the US Dollar Index (DXY) reversed a two-week downward trend at Friday's close, trading down 0.14 percent intraday near 102.000 as of press time.

 

US Nonfarm Payrolls (NFP) for May came in at 390K, above expectations of 325K but falling short of the upwardly revised prior readings of 428K. In addition, the unemployment rate stayed constant at 3.6% against predictions of a minor reduction to 3.5%. In addition, the US ISM Services PMI dropped to 55.9 in May, compared to the market estimate of 56.4 and the flash reading of 57.1 in April. Following the release of the statistics, Loretta Mester, president of the Federal Reserve Bank of Cleveland, stated that the Fed's only worry is inflation. The officials underlined that the likelihood of a recession has increased.

 

Wall Street benchmarks finished in the negative and US 10-year Treasury rates saw their first weekly increase in three weeks to reflect the risk-averse sentiment of the previous day. However, S&P 500 Futures increased by 0.5 percent to 4,126 and US 10-year Treasury rates fell by 1.3 basis points (bps) to 2.942 percent as per the most recent data available.

 

Amid a pre-Fed blackout for Fed officials and in anticipation of Friday's US CPI, USD/TRY traders should pay attention to risk drivers moving forward.

Technical Evaluation

A successful breach of the prior resistance line from early January, about 16.45 at the time of publication, would lead USD/TRY values toward the $17.00 mark before testing the late 2021 top at $18.36.


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