15 June 2021
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US data in focus

By Edward Bell

  • The focus today will be on US retail sales and industrial production data as the Fed starts its 2-day FOMC meeting.  Retail sales are forecast to have declined -0.7% m/m in May as it continues to normalize after the boost from stimulus cheques in March.  Industrial production is expected to have increased 0.7% m/m in May, with capacity utilization rising slightly to 75.1%, still below pre-pandemic levels. 
  • The UK has delayed the last stage or re-opening by four weeks to 19 July as coronavirus infections have risen sharply in recent days and could put hospitals under strain.  The remaining restrictions around mask-wearing and social distancing affect mainly entertainment and hospitality businesses.  The extra time would allow for more of the population to receive the second dose of the Covid-19 vaccine as well as for younger people to get their first dose.  The furlough scheme will not be extended beyond end-September.
  • Separately, Bloomberg reports that the UK will announce the terms of a free trade deal agreed with Australia today, its first post-Brexit FTA. The agreement is expected to cut tariffs on clothing, cars, alcoholic beverages and some agricultural products but is unlikely to have a significant impact on the UK’s growth trajectory with Australia accounting for just over 1% of the UK’s total trade in 2020.
  • India’s CPI print for May came in faster than expected with prices rising by 6.3% y/y, almost a full percentage point higher than anticipated and outside the RBI’s target of 2-6% price growth. Price growth was spread across products with fuel prices up nearly 12% y/y while food prices gained 5.01%. Even as price growth has moved higher, the RBI is likely to commit to its policy of keeping rates on hold while India’s economy recovers from a surge of Covid-19 cases earlier in the year that brought significant parts of the economy to a halt.     

Today’s Economic Data and Events

  • 10:00 UK ILO unemployment rate (3m to April) forecast 135k
  • 16:30 US retail sales (May) forecast -0.7% m/m
  • 16:30 US empire manufacturing (Jun) forecast 22.7
  • 16:30 US PPI (May) forecast 0.5% m/m and 4.8% y/y
  • 17:15 US industrial production (May) forecast 0.7% m/m

Fixed Income

  • US Treasury markets were generally quiet until the US session when bonds sold off ahead of the start of the FOMC. Yields were broadly higher with 2yr UST yields adding 1bp to 0.157% and the 10yr added 4bps to bring it just shy of the 1.5% level. The FOMC begins today and while we expect no imminent change in policy focus will be on the Fed’s new economic projections and whether discussions of moderating currently accommodative policy grow louder among policy makers.
  • The move lower in benchmark bonds was reciprocated in European bond markets with yields on bunds and gilts also edging higher. Reaction in emerging market bonds was more muted, with yields a few basis points higher in South African bonds and roughly flat in India. Turkish bonds showed the biggest move in our markets though with 10yr yields down 56bps overnight, benefitting from a narrowing of the trade deficit and a central bank swap deal with China even as the meeting between US president Joe Biden and his Turkish counterpart Recep Tayyip Erdogan yielded no immediate change.
  • Turkey has mandated banks for a USD 5yr sukuk of benchmark size. Turkey last issued a USD 5yr bond in January this year which is currently at a yield of around 5%.
  • Dubai Islamic Bank will issue a USD 5yr sukuk according to press reports. DIP has a six year sukuk in the market at the moment (maturity 2026) and is currently at a yield of around 1.77%
  • Moody’s revised its outlook on National Bank of Oman to stable from Negative.


  • Currency markets were relatively contained with markets waiting for the outcome of the FOMC for any near-term catalyst for the dollar. The broad USD index settled with a lower bias at 90.522 with EURUSD accounting for most of the move. The single currency closed up 0.09% at 1.2120.
  • USDJPY rose by 0.37% to push back above 110 and is extending moves this morning ahead of the Bank of Japan’s policy meeting later this week.
  • Sterling also managed a modest move higher even as the government has confirmed it will delay the full reopening of the economy.


  • Equity markets were generally stronger overnight ahead of the start of the FOMC. The S&P 500 added 0.18% overnight while the tech-oriented NASDAQ gained 0.74%. In Europe equity markets were generally higher with the FTSE up 0.18% and the CAC up 0.24% while the DAX settled slightly lower.
  • Local markets pushed higher with the DFM rising 0.9% and the ADX up 0.5%. In Saudi Arabia the Tadawul pushed higher by 0.15%.


  • Oil prices had another day of grinding higher, up 0.23% in the Brent market to USD 72.86/b but have managed to push above USD 73/b in early trade today. WTI consolidated around the high USD 70/b level but has pushed up above USD 71/b in early trading today. News that the UK would maintain Covid-19 restrictions had little impact on oil markets overnight as focus remains on centres of strong demand elsewhere.
  • The EIA projected another monthly increase in US shale production, hitting 7.8m b/d in July. That would represent the largest production since December but remains well off pre-pandemic levels.
  • Gold prices have wobbled in recent days, down 0.6% overnight to USD 1,866.18/troy oz ahead of the FOMC and expectation that the Federal Reserve will firm up discussion about how it will bring an end to its extensive quantitative easing.

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Written By

Edward Bell Head of Market Economics

Khatija Haque Head of Research & Chief Economist

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