[Market Review].
U.S. bond yields plummeted. On Tuesday, the U.S. Treasury sold $58 billion of three-year Treasuries with a bid multiple of 2.69. This was a far cry from the last 7-year U.S. bond auction, when the bid multiple was only 2.04. Apparently, strong buyer demand met supply in this auction. This helped push U.S. bond yields lower collectively. Three-year U.S. bond yields plunged 6% during the day. And the 10-year U.S. bond yield also fell to near 1.5%, the lowest level since last Thursday, having moved away from Monday’s high of 1.6%. Zero Hedge notes that despite the bright performance of the bond market overnight, the real test will come today. Later today, the U.S. Treasury will issue $38 billion in 10-year Treasuries. And CPI data will also be released today. Two major events are coming, which will probably cause violent market volatility.
The U.S. indexes retreated from their highs. Affected by the plunge in U.S. bond yields, the U.S. dollar index fell back sharply, once lost the 92 mark. For now, we need to keep an eye on the progress of the $1.9 trillion stimulus package in addition to the U.S. bond issue and CPI data. It is reported that the U.S. House of Representatives plans to vote on the stimulus plan today.
Gold is making a strong comeback. U.S. bond yields, the dollar plunged, causing the precious metals market to rally en masse. Gold once rose above the $1720 mark, rallying $30 from the intra-day low, then shaking at a high near $1710.
Silver jumped 3%. Similarly, silver climbed as high as above $26 from near $25, an intra-day gain of 3%. Silver is currently trading above $25.
The euro broke through the 1.19 handle at one point. The dollar weakened, while non-US currencies generally rebounded. The euro surged 50 points against the dollar during the day and once broke through the 1.19 barrier. For now, EURUSD bulls may be on guard for Thursday’s ECB interest rate resolution, and the meeting may further discuss concerns about the recent rise in yields.
Sterling shocks higher. In addition to the euro, the pound rose more than 60 points against the dollar during the day. The weaker dollar, the UK’s aggressive vaccine push, and Bank of England Governor Bailey’s cautiously optimistic view of the economic recovery all supported the pound.
U.S. oil rose and then fell. Finally, a look at the oil market. U.S. oil rose and then fell during the day, once approaching $66, then shocked down and now hovers around $64. U.S. API Crude Oil inventories recorded an increase of 12.792 million barrels, much higher than the expected decrease of 833,000 barrels. However, the oil market was not much affected by this.
[Risk Warning].
Bitcoin: Positive factors still exist Bitcoin up to 75,000
Bitcoin rose to a two-week high on Tuesday due to a rebound in risk appetite in financial markets. Although high-profile varieties like tesla have plunged recently, large financial institutions are scrambling to enter this market, which will still boost bitcoin. Some strategists say technical indicators support a stronger bitcoin, with prices looking up to $75,000.
Euro: The euro is expected to continue to weaken and will test 1.18 in the near future
The euro rose more than 50 points against the dollar on Tuesday, which exceeded UOB’s expectations. Nevertheless, the bank expects the pair to continue to weaken and fall below 1.18 within the next 1-3 weeks. after falling below this mark, the focus will shift to 1.1740. only a breakthrough of 1.1980 will indicate that the euro’s current weakness has ended.
Australian dollar: if the tightening of monetary policy, the Australian dollar will touch 0.83
Benefiting from the retreat in U.S. bond yields, commodity-related currencies generally rose. Among them, the Australian dollar rose by 0.9% against the U.S. dollar. Looking ahead, the Commonwealth Bank of Australia noted that the RBA may tighten monetary policy earlier than the Fed, which will benefit the Australian dollar, which is expected to reach 0.83 against the dollar in the third quarter of this year.
[Key Forecast
21:30 U.S. CPI may pick up in February
First, take a look at the U.S. will release the monthly CPI rate for February. The data released last month recorded 0.3%. Agencies commented that U.S. consumer prices rose in January at the fastest pace in five months, mainly because of higher oil and gasoline prices, but despite the rise in energy prices, they are still much lower than a year ago and broader Inflation remains low.
The figure is likely to continue to pick up by February. Collating the February data reveals that while the ISM non-manufacturing PMI fell short of the previous and expected values, the ISM manufacturing PMI was better than expected and the final Markit services PMI hit a new high since November 2018. Non-farm payrolls added 379,000 new jobs, the largest increase since October last year, and the unemployment rate recorded 6.2%, a new low since March last year. Some agencies also expect higher gasoline prices to push up the overall U.S. consumer price index in February. The large amount of fiscal stimulus and the expectation of getting rid of the Epidemic more quickly have many economists predicting at least a brief round of inflationary pressure later this year.
Currently, the market expects the monthly U.S. quarterly CPI rate for February to be 0.4%, which may be positive for the dollar if the published value is larger than expected; conversely, it will be negative for the dollar.
In addition, the annual CPI rate will also be released at the same Time, the market is expected to be 1.7%, far exceeding the previous value. If both sets of data are said to be strong, the dollar index may strengthen.
23:00 The Bank of Canada may indicate that it will scale back its bond purchases
Later, the Bank of Canada will announce its interest rate resolution. Data released by Statistics Canada last Tuesday showed that the Canadian economy grew at a 9.6% annualized rate in the fourth quarter of last year, beating analysts’ expectations of 7.5%. According to preliminary estimates, real gross domestic product may have grown 0.5% in January. BMO Capital Markets chief economist said the data assessed in early January showed that Canada’s performance in response to the second outbreak restrictions was much better than most people expected. Some economists said: because of the good performance of economic data, the Bank of Canada may be announced in April, to start reducing the size of quantitative easing purchases.
Bank of Canada Governor David McCollum reiterated last week that interest rates will remain at record lows until 2023. Canadian mortgage rates have begun to rise for the first time since the pandemic broke out, reflecting a spike in long-term bond yields.
The agency survey showed that 15 of 21 analysts said the Bank of Canada will scale back its asset purchases next; it is expected to keep rates at 0.25% until 2022, the same as the January survey results. Based on this, we believe that the Bank of Canada will maintain the 0.25% interest rate level and indicate that it may scale back its asset purchases. In addition, the central bank is likely to emphasize that the economic recovery is better than expected and will keep an eye on the performance of bond yields.
23:30 EIA crude oil inventories may increase
Finally, take a look at EIA crude oil inventories, which increased by 21.563 million barrels in last week’s release. Financial blog Zero Hedge commented that the EIA data was shocking, with a record increase in crude oil inventories and a record drop in gasoline inventories. Gasoline demand rebounded after plummeting, but is still well below pre-epidemic levels. This morning, API crude oil inventories have been released, increasing by 12.792 million barrels, while gasoline inventories continue to decrease.
Based on past experience, API inventory data and EIA inventory data have a relatively strong positive correlation, so EIA crude oil inventories could also increase.
Even so, it should be noted that the current market expects the EIA crude oil inventory to decrease by 833,000 barrels in the week of March 5. If the data released exceeds expectations, oil prices may dip in the short term; if the inventory data is less than expected, oil prices are expected to strengthen. It is also important to note that the U.S. $1.9 trillion stimulus bill will come to fruition, which will push up crude oil demand expectations.
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