After the US markets returned from a one-day holiday at the beginning of the week, the harmony of the global financial markets was broken.
Investors on a global scale, in times of increased risk, want to take shelter in the US 10-year bonds, which are not only liquid but also a safe harbor. As you can appreciate, there is a need for dollars to buy these bonds, which have a 10-year maturity indicator position. The interest rate of the bond is falling and the price is rising.
In the global financial markets, this ‘asylum’ request has become the agenda of the last days. As we highlighted in our bulletin, the yield of the US 10-year bond dropped to 1.29% yesterday, testing the lowest level of the last 4.5 months. In technical terms, we attach great importance to the level reached. In case of going down, the 1.2% level may come to the fore, but I can easily say that this is not our main scenario (see graph).
While the FED is trying to get out of the ultra-low interest environment (money gushing out of the ears and almost non-existent interest rates) and has started to give the signals of this, the sharp decline in the market rate contrasts with the FED’s policy stance and inflation dynamics. While we shared in our bulletins that a few months ago, we expected the 10-year interest rate to move up to 1.97% with the threat of inflation and the FED’s hardening of its tone, the developments took the opposite direction! Heads are not clear!
At this point, the dollar required to buy US bonds pushes the market rate of the dollar, namely DXY. Or, this demand for the dollar and falling market rates is creating demand for additional dollars, creating alarm that the Fed may escalate its stance. We don’t know which is the chicken and which is the egg, but we see that DXY has reached the level of 92.8 this morning, as we highlighted in our bulletin yesterday. Above this level, it may increase the fever of the other world and the dollar, and therefore the fever of the global markets (see graph).
In this context, yesterday, eyes were turned to the minutes of the previous meeting of the FED, in the evening hours. The policy makers of the FED have indeed brought the issue of reducing bond purchases to the agenda and discussed, but it has been concluded that the conditions are not ripe for this now. From this point of view, we can say that the market effect is not much.
With the rise of DXY, the EUR/USD parity was 1.18 yesterday; GBPUSD parity, on the other hand, fell below the 1.38 level. Especially on the EUR front, today we will follow the new monetary policy strategy of the European Central Bank and then the presentation of Leader Lagarde at 14:30.
Oil prices ‘dispersed’ again without any agreement after talks amid the Organization of the Petroleum Exporting Countries and its allies, including Russia, known as OPEC+, rejected the de facto president Saudi Arabia’s demands for the United Arab Emirates to increase production. The absence of an agreement on the increase in oil production, or rather the failure to reach an agreement, has caused Brent crude oil to lose more than 5% in value since the record closing on Monday (see graph).
The glare on weekdays with a straw-flame style in the ounce prices of gold and silver, unfortunately, could not be permanent with the strengthening of the dollar’s hand. Silver slumped below $26 once again, while gold retreated below $1,800. A pullback up to 25.30-25.50 in silver seems technically possible.
The flagship of cryptocurrencies continues to oscillate below the critical level of 36,600 and technically inside the squeeze area. Considering the rise to the possible level of 41 thousand dollars as a formation, we continue to wait on the sidelines, believing that the $21,000 level below is technically the target zone (see chart).
Global financial markets are starting the new day with a cautious trend. Asian stock markets, which are trying to end the day in the morning, and the futures processes of the US stock markets are also red. Eyes will be on whether the US bond yield will fall below the 1.30% level and whether the depreciation of the Dollar (DXY) will rise above the 92.8 level.
In the information flow, we will try to understand the interest or indifference of domestic and foreign investors in TL assets by following the CBRT’s weekly money and bank and securities reports. Relatively calm course continues in USDTRY exchange rate. Technically speaking, below 8.65 levels will be worth it for next week! We’ll detail it when the time comes.
On the macro front, weekly unemployment benefits can be tracked, as is the case with every Thursday in the USA.
Source: iktisatbank. com