Dubai TV Interview, June 14, 2021

Speaking to Dubai TV on Monday, Mohamed Hashad, Director of Research and Development at Noor Capital, explained the recent developments impacting global markets, with anticipation for the upcoming U.S. Federal Reserve meeting.

Federal Reserve

Last week, we saw clear market movements following the release of inflation data in the United States, which showed a large increase in the U.S. consumer price index (CPI), this led the U.S. Dollar (USD) to rise against major currencies and commodities. However, risks still loom amid a rise in inflation compared with average wages.

All scenarios are possible for the coming Federal Open Market Committee (FOMC) meeting, with markets needing more clarity in terms of the U.S. monetary policy vision. There are mixed expectations for the interest rate decision, with some expecting the Fed responding to the surge in inflation by raising interest rates, and others seeing that the Fed will likely consider the rise in inflation levels to be temporary and not persistent for longer periods of time, which would support maintaining the Fed’s current easing policies.

Oil

After reaching their highest level in more than two years, crude oil prices still have room for more rises in the near future, amid the current market conditions. There is a number of factors in the balance, including the expected recovery of global demand, improving activities within the travel, aviation, and freight transport sectors, which could provide more support for oil prices. This is especially with the decline in new coronavirus cases in India, the world’s third largest oil importer, and amid declines in inventories and the U.S. rig count.

Oil has established strong support near the level of $69-70 a barrel, we may be seeing prices hover around $72.60 and $73.50.

Gold

After finishing last week with a decline, gold maintained the downward trend in the beginning of this week, extending losses to about 3%. The USD’s appreciation and higher Treasury bond yields weighed on gold prices, as well as the improving risk sentiment among investors, with digital currencies also attracting some cash flows, with Bitcoin gaining about 12% with the beginning of the week.

The outcomes of the next Fed meeting will have a huge impact on the yellow metal, as the Fed will either raise rates or maintain interest near 0%. The current correction downward trend targets the levels of $1,825 per ounce.

UK

Recent remarks by the British Prime Minister, Boris Johnson, were positive. The PM, who is scheduled to give a speech later today, seemingly wants to reassure markets, and he might move on with easing restrictions starting from June 21.