The dollar index is back above the 90 mark. Just this past week, the US dollar index has been on a shock rally, and DailyFX analysts say that if the greenback can break above the mid-February swing high of 91.06, it would signal the start of a new uptrend. Higher U.S. bond yields have caused more money to flow into U.S. assets in pursuit of profits, thus giving support to the dollar. However, the acceleration of global vaccinations and the slowdown in the growth of the Epidemic are not favorable to the safe-haven dollar. According to statistics, as of February 22, the total number of vaccinations for new crowns in 92 countries and territories worldwide reached 205 million doses, exceeding the total number of confirmed cases, and the number is still growing at a daily average of about 6.44 million doses. In addition, Fed Chairman Jerome Powell’s pledge not to tighten monetary policy easily also pressured the dollar. The Fed maintains a cautious view of future recovery prospects and has pledged to continue to maintain accommodative policy measures for an extended period of Time. Then there is the expected $1.9 trillion stimulus package from Biden, which also weighed on the dollar. Earlier Saturday, the U.S. House of Representatives passed the stimulus plan. According to the legislative process, the bill will be voted on in the Senate this week. The bill is expected to undergo a major test in the Senate, with some of the core provisions currently in dispute as to whether they can be passed and a new version of the bailout bill likely to emerge.
Gold is hovering lower. Likewise, gold suffered heavy losses due to the spike in U.S. bond yields, and at one point touched down to $1717, hitting a new low for the year. On Friday, gold prices fell below the $1725 level, which is a very important support, the analysis said. At the moment, gold technicals look bad, and if gold can’t hold $1725, there could be some selling and a test of $1700 this week.
Silver is underperforming. Like gold, silver is also underperforming. Last week, silver prices rose above $28 at one point, but then fell sharply, to $26.11 at one point. Silver fell 1.8% on a weekly basis.
The euro fell to around 1.20. In non-U.S. currencies, the euro rose and then fell against the dollar, hitting a high of 1.2243, a cumulative decline of more than 30 points during the week. The eurozone economy contracted by 0.6% in the fourth quarter of last year, better than market expectations. However, the pace of recovery is less than the United Kingdom and the United States. The dollar strengthened and also put pressure on the euro.
The British pound retreated again. Let’s look at the British pound again. Last week, the pound broke strongly through the 1.42 handle against the dollar, but has now fallen to around 1.40. The UK maintains its lead in vaccination and the market has good expectations for the future prospects of the UK economy after Brexit, supporting the pound. However, the pound fell back again against the dollar against the backdrop of a renewed dollar rally.
The U.S. and Japanese oscillated higher. Yen. The US dollar has shaken up against the yen, gaining more than 1% on a weekly basis. The pair is currently trading above 106.
U.S. oil is hovering higher. Finally, a look at the oil market. Last week, oil prices continued to soar. At one point, U.S. oil rose to $63.78 per barrel. The rise in oil prices was mainly supported by these factors, one being the unexpected cold snap in the U.S., which hit the U.S. energy sector hard and caused U.S. Crude Oil production to plunge, supporting oil prices. In addition, the acceleration of the global vaccination for the new crown and the continued rise in expectations for a positive economy also pushed up oil prices. This week, the fate of international oil prices hinges on the outcome of the OPEC+ ministerial meeting.
The dollar: Yields are rising though the dollar is still expected to fall
Goldman Sachs pointed out that although global bond yields are generally rising, the dollar is still expected to generally weaken against G10 and emerging market currencies. Goldman Sachs said in a research report, as long as U.S. short-term interest rates remain low and other curves are changing, the dollar may still come under pressure.
Gold: U.S. bond yields adjust Gold fears strong rally
Analysts at the financial website Fxstreet said that regardless of the non-farm payrolls data released this week, investors will likely remain focused on the movement of U.S. Treasury yields. In February alone, the 10-year U.S. bond yield rose more than 35 percent. Since the beginning of the year, it has risen nearly 50%. A deep correction in yields could put the dollar under significant selling pressure and trigger a strong rally in gold prices.
British pound: Pound U.S. fell below important support and is expected to weaken further
Credit Suisse noted that the pound flipped against the dollar, falling below the recent important support level of 1.4082-14079, also fell below the original rising 13-day SMA, the pair is expected to have room for further weakness, the future is expected to stabilize in the 1.3840-1.3830 range. If the pound continues to move lower, look below 1.3741-1.3731 or even the 55-day SMA at 1.3683.
Tuesday 00:10 Lagarde or the old tune
First, take a look at the upcoming speech by ECB President Lagarde. Late last month she said that the epidemic remains highly uncertain and that the ECB will continue to support all sectors of the economy and maintain favorable financing conditions during the epidemic. The ECB is closely monitoring nominal yields on long-term bonds. And earlier last month month she said there is no need to worry about Inflation and the need to continue to maintain accommodative monetary policy and to maintain fiscal support until the end of the year; if necessary, the size of the emergency anti-epidemic bond purchase program can be expanded. For the recovery in 2021, vaccines are of paramount importance. This continues her previous position.
Based on this we believe that Lagarde will emphasize that the ECB will maintain an accommodative monetary policy and expand the size of the bond purchase program if necessary. In addition, she may mention inflation again, indicating that there is no need to worry about excessive inflation in the short term. In addition, she may mention European bond yields, and the ECB may act if yields continue to strengthen.
Tuesday 11:30 Australian Federal Reserve may expand bond purchases
At noon on Tuesday, the Australian Federal Reserve will announce its interest rate resolution. In the last resolution, the Fed maintained the benchmark interest rate and 3-year Treasury yield target at 0.1% unchanged, in line with market expectations. The Australian Fed also announced that it will buy a further A$100 billion in bonds when the QE program expires, starting in mid-April at a rate of A$5 billion per week. Australian Fed officials said the agency was trying to keep up with its international counterparts in an effort to dispel speculation of premature lifting of stimulus measures.
By the end of the month, the Australian Fed is likely to stay put. Australia’s largest Life insurance group predicted that the Australian Fed may react to the big rise in Treasury yields and reiterated that the economy still faces uncertainty and is currently far from achieving its inflation and employment targets and will not raise interest rates in the short term. In addition, the Australian Fed is likely to confirm the increase in bond purchases to maintain the 3-year Treasury yield at 0.1% of the operation.
Wednesday 21:15 ADP employment numbers may pick up
On Wednesday, the U.S. will release the ADP employment figures for February. in January, the figure increased by 174,000. Yahoo Finance said that despite the pressure on hiring caused by the new crown epidemic pandemic and winter weather, ADP data showed that the U.S. private sector added far more jobs than expected in January and resumed growth. This marked a significant reversal following a sharp decline in service sector employment.
By the end of the month, some analysts predict that U.S. ADP employment may register 165,000 in February. If the data is less than expected, the dollar index may come under pressure to the downside; if it is better than expected, then the dollar index may strengthen.
It can be seen that the market is slowly turning better for the U.S. labor market expectations, which may be a signal that the U.S. economy is warming up.
Thursday’s pending OPEC+ may consider increasing production in April
On Thursday, the 14th OPEC+ oil producing countries will meet. According to the earlier production cut plan, OPEC+ will stick to a production cut of 7.2 million barrels per day until April. This meeting watch out if OPEC+ will raise crude oil production.
Sources said OPEC+ producers will consider moderate easing of production limits from April onwards, given the recent recovery in oil prices. The sources believe OPEC+ could increase production by 500,000 barrels per day from April without adding to inventories. Saudi Arabia’s voluntary production cut of 1 million barrels will end next month, and OPEC is now gradually increasing expectations that Saudi Arabia will start gradually resuming production increases from April. In this regard, sources believe that once Saudi Arabia resumes its previous output, this also means that other OPEC+ countries should not increase production.
But it is necessary to pay attention to the attitude of Russia, which does not want to maintain higher oil prices. Russia fears that if production cuts support oil prices for too long, it will stimulate increased investment in U.S. shale oil, which will increase global supply and thus threaten the OPEC+ production cut agreement, so Russia advocates scaling back production cuts to compete for market share.
The OPEC+ meeting in March is likely to be very divisive, so keep an eye out for that.
Friday 21:30 U.S. non-farm payrolls data may have a bright performance
Last but not least, watch out for February’s non-farm payrolls, which rose by 49,000 in January, with the unemployment rate dropping to 6.3%, as CNBC commented that the employment situation remains challenging, with millions still out of work after companies laid off workers in March and April 2020 to fight the epidemic. More than half of those out of work have returned to work, but employment remains below pre-epidemic levels in most sectors, with the hospitality sector being particularly damaged. While the next few months are likely to remain challenging, the new crown vaccine offers hope that the U.S. economy will be running at full speed in the second half of the year.
Currently, the market is expecting U.S. nonfarm payrolls to increase by 133,000 in February, with an unemployment rate of 6.7%.
The epidemic has been somewhat contained with the widespread vaccination, which will help the labor market recover strongly.