[Market Review].
U.S. bond market “avalanche”. On Thursday, the U.S. Treasury auctioned $62 billion of 7-year Treasuries, but the bid multiple, a measure of demand, hit a record low, including the worst ratio of indirect purchasers of foreign central banks since 2014. Zero Hedge commented that such auction results suggest that suddenly no foreigners want to touch U.S. debt. Following the results, U.S. bond yields rose sharply across maturities. Among them, the 10-year U.S. bond yields rose above 1.5% and 1.6% two consecutive hurdles during the day.
In addition, last night’s initial jobless claims and fourth quarter GDP revisions, both better than expected, also boosted the dollar. Earlier, several Fed officials, including Powell, said the spike in U.S. bond yields reflected market optimism about the economy coming out of the new crown crisis, and stressed that the Fed has no plans to tighten policy prematurely as a result. For now, we can keep an eye on the stimulus bill that is likely to be voted on before the weekend.
Gold saw another big drop. Higher U.S. bond yields and a sharp climb in the dollar index have put gold under pressure. Gold prices fell almost $40 intraday on Thursday. In a comprehensive week, gold rose and then fell, currently hovering around $1770.
Silver gave back this week’s gains. Next, let’s focus on silver. Affected by the above factors, silver prices also saw a sharp decline yesterday, down to $27.2 near, basically retracted this week’s gains.
The euro fell back again. On the non-US currencies. The euro moved against the dollar, roughly the opposite of the dollar index. Earlier, a weaker dollar, coupled with positive German Q4 GDP data, supported the EURUSD upward to 1.2243 at one point. however, as the dollar rallied again, the pair also gave back its earlier gains. In addition, European anti-Epidemic funding and the slow pace of vaccinations also weighed on the euro.
The British pound retreated to higher levels. Another look at the British pound. The pace of vaccinations in the UK exceeded expectations, the lifting of the embargo rekindled hopes for recovery, and economic fundamentals gradually repaired, at one point pushing the GBPUSD above 1.42. However, the pair then fell back below 1.40, due to renewed strength in the dollar and pressure from long profit-taking.
Oil prices continue to shake higher. Finally, a look at the oil market. Although both the API and EIA Crude Oil inventories released this week increased more than expected, it did not hinder the upward trend of oil prices. U.S. oil rose a total of 6% this week and is currently trading near $63. Oil prices are rising, partly because investors expect supply to decrease, and partly because the global economy is starting to reopen, suggesting that consumption will rebound further. However, there is a possibility that OPEC+ will increase supply in April. The organization will meet next week to discuss production policy, which we will focus on.
[Risk Warning].
Euro: Without major good, the euro remains range-bound
Westpac said the slowdown in European recovery funding and vaccine distribution has dampened regional confidence, especially as unsealing has been delayed. If the EU fails to boost hopes for a more effective outbreak response, the coming week’s data is unlikely to give market sentiment a major boost, and the EURUSD is likely to continue to trade in the current range of 1.20-1.23.
Australian dollar: Australia’s Fed expected to dovish Australian dollar fears to face suppression
The Australian dollar surged to above 0.8 against the U.S. dollar at one point. The factors driving the strength of the Australian dollar, in addition to the epidemic easing brought about by the economic expectations, as well as triggered by the strengthening of commodity futures prices, but also because global investors have high hopes for further improvement in the international trade environment during the year. However, investors expect that next week’s Australian Federal Reserve interest rate resolution will release more dovish signals to stop the Australian dollar from appreciating too quickly, which will expose the exchange rate to a degree of early suppression.
Swiss franc: If the U.S. Swiss below 0.9 will lose its upside potential
Commerzbank’s technical analysis suggests that the USDCHF, which is currently holding above 0.9, will still maintain upside potential. If the pair breaks down below 0.9, this is the Time to turn attention to the 55-day moving average at 0.8903 and the range 0.8868-0.8872. thereafter, the targets are down to the Jan. 22 low at 0.8839 and the Dec. 18 low at 0.8823, respectively. a loss of 0.8823 could lead to another test of the recent low at 0.8758. if it falls below that level, then the targets point to the 2014 low. If it falls below that level, then the target points to the 2014 low of 0.8698-0.870.
Key Outlook
21:30 U.S. January PCE data is expected to decline
First, to focus on the United States will be released PCE data. Last October and November, the annual rate of PCE price index remained at 1.4%. in December, the data recorded 1.5%. By January this year, the data may fall back, finishing January data can be found, although retail sales recorded 5.3%, but CPI data is less than the previous value, the U.S. non-farm payrolls are also less than expected.
Currently, the market expects the U.S. January core PCE price index at an annual rate of 1.4%, if the published value is better than expected, or good for the dollar; if the published value is less than expected, or negative for the dollar.
At the same time, we should also pay attention to the monthly rate of PCE price index published at the same time, the market is expected to be 0.2%. You need to take into account the impact of these two sets of data on the dollar index.
Saturday 02:00 U.S. oil drilling total fears decline
Next, take a look at the total number of U.S. oil drilling. The U.S. oil market has been hit hard because of the extreme cold weather. Smaller U.S. shale oil producers said Monday that this latest winter storm will affect their first quarter oil production. Analysts said it will take two weeks for shale oil producers in the southern U.S. to restart more than 3 million barrels per day of crude output that was shut down. Supply doubts raised by the cold snap are gradually emerging. Analysts estimate that unusually cold weather in Texas and oil-producing Basin states has forced the shutdown of as much as 4 million barrels per day of crude oil production.
The number of active rigs in the U.S. fell for the first time since November, affected by cold and snowy weather in Texas, New Mexico and other energy production centers.
Currently, the market expects the total number of U.S. oil rigs to be 303 for the week of Feb. 26. If the published value is larger than expected, it may be negative for oil prices; conversely, it will be positive for oil prices.
Because of the extreme cold weather in the U.S., the total number of U.S. oil rigs may continue to decline in the last two weeks, and crude oil supply will be affected, which will support oil prices, so please pay attention to it.
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