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Foreign Exchange Market Update

Foreign Exchange Market Update

Please call the FX Department at 626-279-3235 for the most current rate.

June 17, 2021

Overnight changes in major currencies (9 a.m. PST)

 

United States (US): Weekly Jobless Claims Unexpectedly Increase After Six Straight Declines

After reporting decreases in first-time claims for U.S. unemployment benefits for six straight weeks, the Labor Department released a report on Thursday showing an unexpected uptick in initial jobless claims in the week ended June 12th. The report said initial jobless claims rose to 412,000, an increase of 37,000 from the previous week's revised level of 375,000. The increase surprised economists, who had expected jobless claims to edge down from the originally reported for the previous week. As Fed Chair Powell said yesterday, there may be a 'speed limit' on the labor market recovery while multiple constraints on labor supply gradually recede. Economists still expect the labor market recovery to gather momentum in the months ahead and anticipate a total of 8 million jobs will be created in 2021. Jobless claims had declined in eight out of the nine previous weeks, falling to their lowest levels since March of 2020. Meanwhile, the Labor Department said continuing claims, a reading on the number of people receiving ongoing unemployment assistance, inched up by 1,000 to 3.518 million in the week ended June 5th. The Fed's projections showed two quarter-point interest rate hikes for 2023, versus none in the March forecasts. Seven officials penciled in a first hike as early as 2022. The central bank raised its projections for inflation and economic growth and took initial steps to wind down the bond purchase program. In his post-meeting press conference, Fed Chair Jerome Powell said reaching the standard of substantial further progress is still a ways off and stressed the central bank would provide advance notice before making any changes to its asset purchases. 06/17/2021 - 06:12AM (RTTNews)

 

Australia: Jobless Rate Drops To 5.1% In May

Australian dollar traded at 0.7556 U.S. cents at 9:00 am PST.

The unemployment rate in Australia came in at a seasonally adjusted 5.1% in May, the Australian Bureau of Statistics said on Thursday - well below expectations for 5.5%, which would have been unchanged from the April reading. The Australian economy added 115,200 jobs last month, blowing away forecasts for an increase of 30,000 following the loss of 30,600 in the previous month. The participation rate was 66.2%, exceeding expectations for 66.1% and up from 66.0% a month earlier. 06/17/2021 - 12:40AM (RTTNews) 

 

European Union(EU): Eurozone Inflation Exceeds Target For First Time Since 2018

Euro traded at 1.1908 against USD at 9:00 am PST. 

Eurozone CPI surpassed the central bank's target for the first time in more than two years in May, final data from Eurostat showed on Thursday. CPI climbed to 2.0% from 1.6% in April. The rate came in line with the flash estimate published on June 1. The actual inflation was the fastest since 2018. The European Central Bank targets inflation below, but close to 2%. The increase in inflation was largely driven by a 13.1% rise in energy prices. Core inflation, which excludes prices of energy, fresh food, alcohol and tobacco, accelerated to 1.0% from 0.7% in April. The rate was revised up from 0.9%. Compared to the previous month, CPI rose 0.3% in May, in line with the flash estimate. 06/17/2021 - 03:07AM (RTTNews)

 

Switzerland: Swiss Central Bank Retains Policy Rates As Expected

Swiss Franc traded at 0.9176 against USD at 9:00 am PST. 

The SNB decided to continue with its expansionary monetary policy in order to ensure price stability and support the ongoing economic recovery. Policymakers of the central bank on Thursday decided to retain the policy rate and interest on sight deposits at the SNB at -0.75%. The bank repeated that it is willing to intervene in the foreign exchange market as necessary, while taking the overall currency situation into consideration. The bank reiterated that the CHF remains highly valued. With the positive, but cautious outlook and inflation remaining below 1% for some time to come a change in monetary policy does not seem to be needed anytime soon. Due to higher prices for oil products and tourism-related services, the SNB raised its near-term inflation outlook. CPI are forecast to rise 0.4% this year, up from the previous outlook of 0.2%. The projection for 2022 was raised to 0.6% from 0.4%. For 2023, inflation is also seen at 0.6% compared to 0.5% projected in March. As economic indicators improved significantly, GDP is forecast to show strong growth in Q2. The bank expects Swiss GDP to return to its pre-crisis level by the middle of the year. The bank lifted its growth outlook for this year to around 3.5% citing the lower-than-expected decline in GDP in Q1. Earlier, the bank had forecast 2.5% to 3% economic growth for 2021. 06/17/2021 - 03:33AM (RTTNews)

 

United Kingdom (UK): GBP Dips Below $1.40 On US Fed Hawkish Surprise

British Pound traded at 1.3916 against USD at 9:00 am PST. 

GBP fell below $1.40 against a strengthening USD on Thursday after the FRS surprised markets by signaling it would raise interest rates and end emergency bond-buying sooner than expected. FRS officials moved on Wednesday their first projected rate increases from 2024 into 2023, signaling the US will begin closing the door on its pandemic-driven monetary policy sooner than previously thought. The move pushed US Treasury yields higher, while equities fell. There have been no fundamental developments overnight driving GBP; rather, selling pressure seems to reflect the broader strength in the USD. The news of the rapid spread of the Delta COVID-19 variant in the UK weighed marginally on sentiment. GBP’s strength versus EUR reflected bets that the BoE could follow the Fed’s lead and tighten policy faster than the ECB In the meantime, data on Wednesday showed inflation in UK unexpectedly jumped above the central bank’s 2% target in May. 06/17/2021 - 04:01AM (RTTNews)


This market update is prepared by Cathay Bank for informational purposes only and does not constitute any form of legal, tax or investment advice, nor should it be considered an assurance or guarantee of future exchange rate movements or trends. This information is provided without regard to the specific objectives, financial situations or needs of any recipient. Cathay Bank does not make any representations or warranties about the accuracy, completeness or adequacy of this market update.

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