US economy on the track to recover, Turkish Lira saw unexpected slip, and gold continues to be pressured down

• US Treasury’s Yellen forecasts the full employment to return in 2022
• USDTRY saw volatility soared towards all-time highs as Turkish Lira plummeted
• Gold pressured by the strengthening US Dollar

Treasury Secretary Janet Yellen will give a speech on Tuesday to US lawmakers that she sees full employment to be possibly return in 2022, largely benefiting from Biden’s massive stimulus package. Yellen has earlier indicated that, the Treasury has been working to expedite relief to areas of greatest need, including the smallest of small businesses, which are disproportionately owned by women and people of color. The Treasury will also reduce documentation requirements for housing relief, totaling $30 billion.

Turkish Lira fell by 15% to near its all-time low on Monday after President Tayyip Erdogan shockingly fired a hawkish central bank governor over the weekend, sparking fears of interest rate hikes. The former governor Sahap Kavcioglu has been firmly believing in the impact on inflation from high interest rates and has been serving the role since mid-2019. Turkey’s holdings of foreign currency rose to a record of $236 billion in January, indicating a potential inflation near 16%, versus the central bank’s target of 5%. In less than 3 years in the past, lira has shed half of its value. At this critical moment, firing a hawkish governor has indeed aroused fear among FX investors. Overnight volatility on USDTRY has rocketed to a record high at 70%, but lira’s massive fall, however, did little to shake investors’ confidence in emerging market currencies.

Gold was down on Tuesday morning in Asia as USD strengthened and also due to a fresh round of COVID lockdown across Europe. USD edged slightly up as the Treasury yields fell, and this week we will also see the Treasury starting auctions on the 2-, 5-, and 7-year debt. In Europe, surging cases are also pressuring the gold. Paris and surrounding areas have entered another 4-week lockdown and Germany extended the restrictions until April 18th.