The ECB is expected to raise rates sooner than forecasts

Eurozone bonds declined as market participants raised expectations that the ECB would raise interest rates earlier than expected.
German bonds led the cut, as the euro rose, after rising expectations that the ECB would raise rates well before December of next year.
Currently, at futures trading levels, the ECB is expected to raise interest rates by 82% by September of the following year. By comparison, until recently the expectations were only 70%.
Interest rates on five-year German bonds rose three basis points to a minus 0.26%, while those on 10-year bonds also added 3 basis points to 0.33%.

The Fed will most likely raise interest rates despite emerging markets

Emerging markets, which are facing serious difficulties because of the Fed's interest rate increase, are not expected to gain sympathy from the federal reserve.
Developing countries' currencies were severely affected by sales due to investors' fears that their economies would not cope with higher US interest rates. This has prompted the central banks of India and Indonesia to call the Fed for careful action while Brazil warned of challenging times.
However, there are not many signs that the problems of emerging markets will change the policy of the Fed. Analysts are expecting at least two more interest rises this year, except for almost full-rate interest rates next week.

Citigroup: Interest rates of 4-4.5% on ten-year US bonds are possible

For global financial markets the situation sounds like a return to normal. The sale of US government bonds, which triggered an increase in interest rates to levels unseen in many years, points to "normalization" on the market, according to Citigroup.
The bearish breakthrough in the world's largest bond market is an underestimated risk, according to Mark Schofield and Ben Nabaro, from the US investment bank. A similar phenomenon in bond markets has not been since the financial crisis, experts recall.
Recent comments suggest that investors are more attached to the scenario where rising interest rates and a strong dollar hinder recovery and lead to a reduction in interest rates rather than a scenario in which interest returns at pre-crisis levels.
These comments come true in an environment of return to global debt markets, with interest rates on 10-year bonds rising above 3.05 percent, a very high level of resistance.
The bulls, with regard to US bond investors, point to the rise in oil prices and overestimated market expectations as the main reasons for interest rate rises above the psychological limit of 3%.
The positive performance of the US economy as well as inflation would justify a premium between long-term and short-term bonds, which means we can see an increase in interest rates on 10-year bonds to 4-4.5%, according to Citi.
Even if they do not reach such levels, raising interest rates on 10-year bonds can in itself create a self-stabilizing mechanism. It is for this reason that many traders believe that interest on this kind of US bonds will decrease rather than continue to rise.
Interest rates of 4.5% are not Citi's base scenario. This is a hypothetical scenario. However, this scenario should not be so overlooked by the market and seems to be underestimated, the bank said.

Long positions in the dollar are modern again

The bets on the dollar are again up-to-date after weakening the tension between the US and China and the postponement of the trade war.
In addition, the expectations are that the Fed will raise the interest rate at its next meeting in June, after failing to do so in May.
The dollar index added 2% since the beginning of the month to date, according to FactSet statistics.
The net long positions of speculators for the week until May 15 are again on a positive territory, for the first time since mid-March, just before the first quarter of Fed's interest rates hike for the year.
Better expectations are already evident in the spot market, where the dollar is booming, against the backdrop of the improvement in the interest rate differential, according to Jane Foley, Rabobank's chief currency strategist.
Investors are monitoring outgoing data for further evidence of the market sentiment and the future direction of green money.
In the first two weeks of May, leverage accounts held net long positions in dollars for the first time since January, according to Stephen Gallo, head of the Forex Trading Unit at IMO.
The US dollar is experiencing exceptionally strong growth, according to Mark Chandler, global strategist at Brown Brothers Harriman. This is a function of rising interest rates and the gradual rise in confidence that the Fed will raise interest rates three times this year, not twice as expected, the expert added.
The next Fed meeting on interest rates is on June 12-13. Futures indicate a 95% chance of raising interest rates by 25 basis points next month.

Powell: The process of normalizing the policy of the Fed is without prejudice to the financial markets

The Fed has made it clear to the markets that it intends to raise the interest rate gradually, and investors are probably not surprised by the actions of the Central Bank, said the head of the Federal Reserve, Jerome Powell.
The process of normalizing the Fed's policy is taking place without damage to the financial markets, and the expectations of traders regarding the future policy of the Central Bank seem to be in good agreement with the expectations of the Fed's management, he said at a conference organized by the International Monetary Fund (IMF) and the Swiss Central Bank.
According to Powel, if the situation in the economy meets expectations, the markets are probably not going to be surprised by Fed's actions.
The Fed raised the rate six times since December 2015, each time by 25 basis points. The last time the rate was raised in March 2018 - up to 1.5-1.75% per annum, and the leaders of the Federal Reserve made it clear that they expect two more hikes this year.
The gradual increase in the rate helped to maintain the Fed's stimulating policy, which supported the growth of employment and economic recovery in the US, and also contributed to a gradual increase in inflation.

Fed kept interest rates unchanged

The Fed kept the interest rate unchanged yesterday, but signaled that the inflation target was reached. Thus, the reserve, though disappointing investors expected an increase in interest rates at this meeting, opened its way to a June increase in interest rates.
The dollar initially declined, but subsequently recovered its losses. The euro returned at trading levels below 1.2000, with the pound continuing with its exceptionally strong impairment. Early this morning, a pound is exchanged for 1.3595 dollars.
The renewal of the Fed's inflation target is a major step after nearly six years in which consumer price growth in the world's largest economy is below the target of 2%.
The Fed also commented on the weak recent data on the labor market, saying labor market activity was slowing down, but it has performed well over the past few months.
In any case, at the next meeting on June 12-13, the Fed is expected to raise interest rates by 25 basis points after not doing so yesterday. Or, the market has bet almost 100%, that we will see a rise next month, unless something really dramatic happens.

The US dollar ran out of its range

The US dollar has overtaken its trading line from the past nine weeks to a basket of currencies.
Nevertheless, green money recorded its best weekly performance since November 2016.
For the week, the dollar index added 1.41%, ending at 91.343 points.
The main catalyst behind the rise of the dollar was the rise in interest rates on 10-year US bonds. They passed the 3% levels for the first time in more than four years. Investors have shrunk their positions in US bonds as a result of fears about rising inflation and the prospects for further interest rates.
In the rest of the news, consumer confidence rose to 128.7 points, exceeding analysts' average expectations, while orders on durable goods grew to 2.6% or against the previous reporting period.
The US GDP also turned out to be above average expectations at 2.3%. Investors, however, continue to worry about the poor performance of consumer spending.
Another major reason for the appreciation of the US dollar against other major currencies was the difference in the Fed's expected policy and other banks around the world that would most likely not be as aggressive to interest rates.

The ECB kept interest rates unchanged

The ECB kept the interest rate unchanged by continuing to maintain its position on a smooth exit from the monetary stimulus.
The bank has confirmed that it will continue to buyback 30 billion euros a month at least until the end of September.
The ECB continues to believe that the best moment to start raising interest rates will be after the potential end of the asset repurchase program.
The ECB's decision became a fact, a day after Draghi confessed to the IMF that there is some slowdown in the growth of the eurozone, but overall growth will continue in the future.
Now, the question everyone is asking is if Draghi's acknowledgment will lead to a change in the ECB's policy towards a smooth exit from the stimulus program.
Inflation in the euro area continues to be weak, expected to rise 1.3% in March, against previous expectations of 1.4%.

US dollar with weekly growth against all major currencies

Over the past week, we have witnessed something that is happening relatively rarely - the dollar has appreciated against all major currencies.
A major part of the appreciation of green money relative to other currencies was predetermined by the rise in interest rates on US bonds, to which the dollar is extremely dependent.
Investors have renewed expectations for further interest rates to be raised by the Fed during the year. The rising demand for more risky assets, on the other hand, has led to further strength for the US currency.
For the last week, the dollar index ended at 90.075 points, or an increase of 0.64%.
Late last week, Fed officials hinted at a further gradual rise in interest rates based on strong economic growth figures.
Fed San Francisco head John Williams said that inflation will rise this year to Fed targets of 2% and will remain above those targets a few years.
In order to protect the US economy from overheating, it is necessary for the Fed to continue raising interest rates, Williams said.
On the other hand, the leader of the Chicago Fed, Charles Evans, said it might be more appropriate to raise interest rates gradually.

Gold with a six-week high yesterday, tested $1,300

The price of gold has fallen today, albeit keeping close to its highest level in six weeks since yesterday's session. This happened after Powell initiated a further raise in interest rates before the Trump Senate Tax Reform vote.
The spot price of gold lost 0.1% of its value to a level of $1,293 per ounce. Yesterday, gold reached a momentum of $1,299 per ounce, or the highest level since October 16.
According to political analysts, North Korea may be preparing to launch new ballistic missiles soon. Such actions would have a positive impact on the price of gold.
Gold is also very sensitive to the interest rates and the US Dollar exchange rate. Traditionally, it is cheaper when the dollar strengthens, or more aggressive on interest rises.
Speculators have lowered their long positions in gold and silver futures in the week to November 21.

The Australian Bank kept interest rates, sent the Australian dollar down

The Australian Central Bank kept interest rates at a record low for the 14th time.
However, this may soon change, given the central bank's forecast for a 3% growth over the next few years and a fall in unemployment from its current levels at 5.5%.
Far more cautious, however, was the tone of the central bank in terms of consumption and inflation.
For the last time, the Australian bank lowered interest rates in August 2016 in order to protect itself against the risk of deflation. The Bank is still facing serious difficulties in returning consumer price growth back to levels of 2-3%.
Inflation rose to only 1.8% in the third quarter of the year, but even this looks pretty high in the short term.
According to the Australian Bureau of Statistics (ABS), built-in inflation is actually about 1.6%.
The futures market does not expect an increase in interest rates in Australia until early 2019. All of this reflects extremely negatively on the Australian dollar, which dropped to 0.7636 against the US or its lowest value since the beginning of July.

Gold returns some of its glitter

Gold went back above $ 1,270 per ounce yesterday after stabilizing in the dollar. This led to a recovery in interest in the precious metal after a third consecutive week of decline.
But the price is still under pressure from expectations of a new Fed interest rate increase next month.
The spot price of gold was trading early this morning at $ 1,278 per ounce, while metal futures with delivery in December rose to $ 1,280 per ounce.
The dollar stabilized on Monday after its biggest weekly rise this year.
The fact that Trump is on a visit to Asia can re-focus North Korea to support the price of the noble metal, according to market observers.
Gold has fallen over the past weeks, back by 2.5 percent of its peak in mid-October, with Fed rising expectations for a further rise in interest rates in December.

The Trump Rally is the fourth best since the 1936's

Since the election of Donald Trump as president last November, the US indices enjoyed a very good performance.
And while the growth of over 20% for the S & P 500 index and 30% for the Dow blue chip index, sending indexes to new records is far from being their best performance compared to modern US presidents.
According to data from the US investment bank Goldman Sachs, the rise in US elections after Trump's election victory is the fourth best since 1936. With a better performance for such a period of election victory, the markets were distinct during presidents George Bush, John Kennedy and Bill Clinton.
The market rally after Clinton's 1996 election victory raises the S & P 500 from nearly 30% a year and over 50% over the next 24 months. This is the biggest rise after a presidential election victory.
It can also be argued about the motives behind the growth of the market. To a large extent, the current one is predetermined by the hopes for tax reforms that will mainly ease major US corporations.
However, as Goldman mentions, shares of companies that are expected to benefit most from tax reform have been worse off the market as a whole this year.
In addition, there are warnings, including from the US Treasury Secretary, that if the tax reform is not adopted, we may see a substantial fall in stock prices.

OPEC starts talking about $70 a barrel

At a meeting in May, several oil ministers from OPEC countries spoke positively of a $50 oil price. This, however, is unlikely to happen at the upcoming cartel meeting. With rising raw materials in recent weeks, the "fair price" for oil will probably rise for the cartel countries.
The Brent, which has been rising since June, has already breached the psychological level of $ 60 a barrel for the first time since July 2015.
According to OPEC, the fair price for oil is almost always slightly above the current price. So by crossing the $ 60 limit, no wonder this fair price would be $ 70 a barrel.
At the end of October, the Qatari energy minister said oil is moving in the right direction, even in a pricing environment of about $ 60. According to Venezuela, the "fair price" of oil is $ 70 a barrel, while according to Iraq these are between 70 and 80 dollars per barrel.
From Russia, however, they are already showing signs of anxiety over the too rapid and sharp rise in oil prices. According to them, levels of 60 dollars would be justified and a good reward for the production cuts in which Russia is also involved.

Weak property growth in the UK

Property prices in the UK maintain their weak growth in October this year. Compared to the same month last year, properties rose by 2.5%. The range of raise is similar to that of the beginning of the year.
The rise in property prices in the UK has slowed down significantly over the past year as a result of the uncertainty associated with BREXIT.
Property grew by 0.2% on a monthly basis, which was a serious slowdown compared to the first half of the year.
Low interest rates and steady levels of employment give some relief to the demand for real estate.
On the other hand, the uncertainty associated with BREXIT and the conditions for leaving the Union can be factors that aggravate the situation for the property market.
The decision of the central bank this week to raise interest rates may have a further negative impact on the properties.
Property buyers and mortgage lenders are already adjusting their finances in a line that fits the interest rate hike.

US indexes with new records, Fed hinted at a December rate hike

Fully expected, Fed retained interest rates yesterday after the two-day meeting of the Monetary Policy Committee. This led to a rise for US indices, with the S&P 500 broad index closed up by 0.16%, to 2 579.36 points.
The Dow Jones blue chip index rose by 140 points at one point, but eventually ended with an increase of 57 points to a level of 23,435 points.
Technological Nasdaq lagged behind its performance, down by 0.2 percent to 6,716.53 points, driven by a 1.3 percent decline in Apple's stock.
Fed responded to the average market expectations and kept the interest rate unchanged. Only 1.5% of analysts forecasted higher interest rates. But the Fed has left the door open for December's interest rate hike. Expectations for this are already nearly 100%, according to CME's FedWatch.

Oil with highest price since July

US indexes rose to new historical records, with oil and copper also rising, rising raw materials index. US government bonds fell after Yellen confirmed the FED's position of a gradual rise in interest rates.
Meanwhile, oil has continued to rise and reached a new two-week high as a result of mounting tensions in Iraq that are expected to affect supply. US crude oil rose by 0.8 percent to 51.86 dollars a barrel.
The US reporting season is gaining momentum, with leading US financial institutions reporting the results.
The S&P 500 index ended with an increase of 0.2% yesterday to a new historic peak.

The Fed kept interest rates, slowing down the pace of increase

Fed kept interest rates unchanged, which was widely expected by analysts. However, what became clear from Janet Yellen's statement was that the reserve would likely slow down the pace of interest rate hikes.
What the Fed said about its record-breaking balance was that it would begin to decline "relatively soon". And though it is not clear when it will happen, according to market observers, most probably in the autumn.
The Fed's balance sheet has a record value of $4.5 trillion, and its reduction in practice will mean withdrawing liquidity from the market. Or totally opposed to the redemption of assets, which triggered strong growth for US indices.
The Fed started with its gradual rise in interest rates in 2015, and after just two increases to the beginning of this year, we witnessed two more this year. This led to interest rates between 1 and 1.25%.
Despite the rise in interest rates, the dollar fell against the rest of the major currencies. The dollar index fell by 8% since the beginning of the year.
Market participants are divided in two on whether we will witness another increase in interest rates this year. Half of the respondents are of the opinion that we will see another interest rate rise in December, while the other half think we will see no more increases this year.

Asian indices rose, Dow with a new record after Yellen

Asian currencies and indices rose after Janet Yellen signaled yesterday that the Fed would not hurry with its policy of further rising interest rates.
The dollar fell for the fourth consecutive day, with the dollar index reaching a 10-month minimum.
Serious increases were recorded by the US indices, such as Dow Jones, at a new historic record of 21 532.14 points. Close to record values are the other two leading US indexes.
South Korean Kospi has risen to a new historic record.

Chances to raise interest rates in Canada is decreasing

The Canadian dollar declined on Friday against the US dollar after weaker than expected inflation figures in Canada. This reduces, according to market participants, the chances of raising interest rates next month.
Inflation climbed to 1.3% in May, which was below analysts' average expectations of 1.5% and far below the target of the Canadian central bank of 2%.
Food and fuel prices have been the main source of slowdown in consumer price growth in Canada.
According to market observers, the Canadian central bank will find it very difficult to raise interest rates next month, given the data.
Chances to raise interest rates in July declined to just 20%, compared with 33% before the data was published.
According to statements by Canadian central bank's officials this week, the moderate monetary policy of the Canadian central bank has played its role, and the bank is expected to assess whether interest rates should remain at their current record lows.
Interest on two-year Canadian bonds fell by 3 basis points below US ones, or the spread between the two instruments was -43.8 basis points. On Thursday of last week, this spread fell to its lowest value in four months - at -40.8 basis points.