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AFEX Market Watch - 22nd June 2021

What Happened Yesterday

 AUDUSD recorded a six month low of 0.7473 just after the European markets open. It then tacked on almost 1% to break its first four-day losing streak since March. Risk returned with stock markets taking back some of the losses of last week, oil hitting a three year high and volatility dropping from 21 to 17. Iron ore was the only driver not to improve. It was 9% down at one stage after China pledged to crack down on speculation.

 Australian retail sales rose by just 0.1% although it is on the back of two very strong months. Food prices rose by 1.5% but household goods and clothing were -1% and -1.5% respectively. This reflects the economy’s transition from goods to services. Lockdowns had their impact with Victoria reporting -1.5% whereas unaffected WA and QLD both reported +1.5%. National sales numbers are 8% above pre-Covid levels.

 ECB President Christine Lagarde said she expects growth to accelerate in the Eurozone this year but for inflation to remain low. “The outlook for the economy is indeed brightening as the pandemic situation improves,” Lagarde said. “Underlying price pressures are expected to increase somewhat this year owing to temporary supply constraints and the recovery in domestic demand, but are likely to remain subdued.”

Major Risk Event

Australia’s vaccine drive began four months ago today. 3.6m people were jabbed in the first three months. 3m people have received a vaccine dose in the last month alone. But it is not enough. Just 0.4% of the population is being vaccinated daily compared with Canada, which is running at 1.2%. They are top of the leaderboard of the largest percentage of the population vaccinated. CAD is the strongest currency in 2021.

Today’s Agenda

Fed Chair Jerome Powell is due to testify on the Fed’s emergency lending programs and current policies before the House Select Subcommittee on the Coronavirus Crisis. He should read a prepared statement and then the committee will hold a question and answer session. He is likely to drop subtle clues regarding future monetary policy.

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