Records on Wall Street

25.06.2021 11:02|Forex

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Yesterday's session on Wall Street ended in an upbeat mood that seems to have continued today. The DJIA index was up 1 percent and was just 2.6 percent off its all-time high. The S&P 500 rose 0.6 percent and the Nasdaq rose 0.7 percent, hitting a historic high.

Today, U.S. index futures seem to be climbing again, with optimism for the market expected to be boosted by the agreement to be announced by U.S. President Joe Biden on infrastructure spending. This is a program with a five-year horizon. With the help of hundreds of billions of dollars, it is expected to help the sustainability of the economic recovery in the United States and give jobs to millions of Americans. The introduction of this program was one of Joe Biden's priorities.

US officials continue to downplay the risk of rising inflation and the need to tighten monetary policy. Treasury Secretary Janet Yellen has noted that inflation in the US should ease from its current high level by the end of the year as supply bottlenecks are removed and Fed Chairman Jerome Powell has pledged not to raise interest rates too soon. Interestingly, central bankers in the Czech Republic, Hungary or Mexico think differently, where interest rates were raised this week amid concerns about rising prices, among other things.

Optimism boosts oil prices

One of the inflationary factors is also the rise in oil prices. A barrel of WTI remains above the $73 level. What's more, oil prices rose for a third consecutive session on Friday and appear to be on track for a fifth straight weekly increase as falling inventories and hopes of a demand recovery outweighed news that OPEC+ plans to continue gradually increasing oil production from August.

The EIA's crude inventories report showed that U.S. surpluses fell by a larger-than-expected 7.61 million barrels, the fifth consecutive week of decline and the largest since the last week of April.

The oil market has risen about 50 percent this year as investors are optimistic about a recovery in fuel demand this summer and vaccination programs in Europe and the U.S. allow more people to travel. There's also still no nuclear agreement with Iran, putting the prospect of Iranian oil returning to the market and increasing crude supply further away.

Downside factors for gold

After the hawkish Fed projections, the gold market cannot pick up. The price of an ounce remained below the $1800 level today, which is close to the 7-week low at $1760.

Earlier, gold prices seemed to be supported by both a weak dollar and widening negative real interest rates in the US. However, both of these factors may have already reached their peak. The dollar is stronger and negative real rates may not be getting any worse as the 2020 base effect has been exhausted.

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

77.46% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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