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1. All three major U.S. stock indexes closed lower. The Dow Jones Industrial Average fell 0.54% to 49,395.16 points, the S&P 500 fell 0.28% to 6,861.89 points, and the Nasdaq Composite fell 0.31% to 22,682.73 points. Boeing fell more than 2%, leading the decline in the Dow. The Wind U.S. Tech Big Seven Index fell 0.29%, with Apple falling more than 1%. The Nasdaq China Golden Dragon Index fell 0.35%, with LuKong falling more than 3% and BaWangChaJi falling more than 2%. 2. Most of the three major European stock indexes closed lower. The German DAX fell 0.93% to 25,043.57 points, the French CAC40 was flat at 8,429.03 points, and the UK FTSE 100 fell 0.55% to 10,627.04 points. 3. A report released by the U.S. Treasury Department shows that in December of last year, 14 major countries and regions reduced their holdings of U.S. Treasury bonds, with a total reduction of $88.4 billion. The total holdings of U.S. Treasury bonds by overseas "creditors" fell to $9.27 trillion. The top three overseas "creditors" of the U.S.—Japan, the UK, and China—all chose to reduce their holdings of U.S. Treasury bonds. Among them, Japans holdings of U.S. Treasury bonds decreased by $17.2 billion to $1.1855 trillion, while the UK significantly reduced its holdings by $23 billion, with its holdings falling to $866 billion. 4. The U.S. crude oil futures contract closed up 2.49% at $66.67 per barrel; the Brent crude oil futures contract rose 2.25% to $71.93 per barrel. 5. International precious metals futures generally closed higher. COMEX gold futures rose 0.12% to $5015.50 per ounce, and COMEX silver futures rose 1.09% to $78.44 per ounce.The yield on Japans 5-year government bond fell 1.0 basis point to 1.620%.Japans preliminary services PMI for February was 53.8, down from 53.7 in the previous month.Japans preliminary manufacturing PMI for February was 52.8, down from 51.5 in the previous month.Japans preliminary composite PMI for February was 53.8, compared to 53.1 in the previous month.

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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