Here is what you need to know on Thursday, June 11:
The market mood has soured after the Federal Reserve painted a gloomy picture and committed to keeping rates low and supporting the economy. Investors focused on the outlook rather than the support, with the dollar eventually rising from the lows, and gold benefitting.
The Federal Reserve pledged to keep rates low at least until 2022, as the bank projects a return to pre-pandemic output not before 2022 with the silver lining being a single-digit unemployment rate by year-end. Markets initially cheered – amid the commitment to act “forcefully. aggressively and proactively” – and the dollar dropped before the trend flipped.
Jerome Powell, Chairman of the Federal Reserve, stressed that members are “not even thinking about thinking about raising rates.” He said that Yield Curve Control (YCC) is still under examination, but seemed somewhat reluctant. The Fed committed to buying bonds at least the current pace, which is some $4 billion per day.
See Federal Reserve tacks between hope and uncertainty: But let’s keep those rates low
The highlight on the US calendar is weekly jobless claims and especially continuing applications, which provide a broader look at the job market.
See Jobless Claims Preview: Defining improvement
Gold is trading around $1,730 and seems to be the clear beneficiary of the Fed’s punchbowl. Forecasts for $1,800 remain prevalent.
Coronavirus in the US: Fears of a second wave are growing amid an increase in hospitalizations in California, as the Golden State joins other large ones such as Florida and Texas with worrying trends. Total COVID-19 cases hit two million.
EUR/USD is trading below 1.1350 amid the fresh dollar strength. Negotiations between EU countries regarding fiscal stimulus continue, with the “Frugal Four” reportedly ready to climb down from their fierce opposition to grants from commonly-raised funds.
UK: Prime Minister Boris Johnson publically clashed with his advisers over government policy, adding to the confusion. Neil Ferguson, the leading epidemiologist, said locking down the country earlier would have saved half the lives lost in Britain.
Brexit talks remained deadlocked as Michel Barnier, Chief EU Negotiator, said the UK wants all the benefits of a member without the obligations. Member states decided to leave his mandate unchanged, to the chagrin of London.
AUD/USD is dropping sharply, also due to threats by China, Australia’s No. 1 trading partner, that the land down under will “pay an unbearable price” for the US in its “new cold war” against Beijing.
Oil prices are on the back foot amid the damp mood and also rising US inventories. USD/CAD has bounced but remains below 1.35.
Cryptocurrencies have continued their gradual grind to the upside, with Bitcoin holding above $9,800. Some speculate that the Fed’s ongoing support would eventually reach digital assets.
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