[Market Review].
The U.S. dollar index rose slightly. The US Dollar Index rose slightly during the day. However, with a late afternoon rally in U.S. stocks and a slight weakening in U.S. bond yields, the U.S. index gave back some of its gains and is now running above the 91 handle. Traders cut their short dollar bets to a four-month low amid the recent rise in U.S. Treasury yields and are remaining cautious ahead of the Fed’s interest rate resolution this week. We also need to keep an eye on the matter of Biden considering a tax increase. To help pay for long-term economic projects, Biden is planning to raise federal taxes sharply for the first Time since 1993, people familiar with the matter said. A previous analysis estimated that the tax plan would raise $2.1 trillion over 10 years. As for timing, if passed, the tax measure could take effect in 2022.
Gold prices continue to rally. Gold prices also saw modest gains on Monday and are currently hovering around $1,730. Falling U.S. bond yields have helped gold prices slowly strengthen. Investors are now waiting for the Federal Reserve’s interest rate resolution this week as a way to gauge the next move in gold prices.
Silver rose more than 1% during the day. Silver also saw a wave of gains during the day. Silver prices climbed from $25.7 all the way to near $26.2, up 1.7%.
The euro came under slight pressure. While the dollar strengthened, non-U.S. currencies were generally under pressure, with the euro falling about 20 points against the dollar during the day. Mitsubishi UFJ pointed out that the poor performance of European economic growth, while the U.S. economic growth is expected to be positive, the pair is forecast to fall to 1.17 this week.
The British pound was under pressure to the downside. The British pound fell 20 pips against the dollar. The pound may have been hit by news that Germany, Italy and France have suspended the use of a new crown vaccine developed by British company AstraZeneca. In addition, the EU took legal action against the UK over its breach of the Brexit agreement. Credit Agricole said the risks surrounding the U.K.’s exit from the EU could once again haunt the pound.
The U.S. and Japanese extended their gains. The dollar oscillated in a narrow range against the yen, hovering around 109 with a volatility of 40 pips or less. The Bank of Japan will announce its interest rate resolution this week, so you can keep an eye on the BOJ’s discussion of the target range for long-term yields.
U.S. oil fell and then rose. U.S. oil once approached the $64 mark, then recovered some of its gains. The dollar strengthened slightly, putting the oil market under pressure. In addition, a new round of quarantine measures in Europe and the number of new crown infections in some parts of the U.S. continued to climb, causing investors to worry that energy demand could take a fresh hit. However, positive economic data from Asia and geopolitical tensions in the Middle East limited Crude Oil‘s losses.
Bitcoin dipped wildly by more than $5,000. Finally, a look at bitcoin. From yesterday to this morning, bitcoin has plunged wildly by more than $5,000 and is now below $55,000. Before that, bitcoin was riding high all the way above $61,000 over the weekend. The bitcoin plunge may have something to do with the news that India is going to legislate a ban on cryptocurrencies. According to foreign media reports, Indian government officials have said that India plans to legislate a ban on cryptocurrencies, penalizing trading, or even holding, cryptocurrencies. The new law will give cryptocurrency holders six months to liquidate such assets. Notably, the U.S. also stepped in last week. The U.S. Commodity Futures Trading Commission is investigating the world’s largest cryptocurrency exchange, Coinan. The above news may hardly dampen investors’ enthusiasm for bitcoin despite the sharp retreat in its price. A survey conducted by Mizuho shows that about 10% of the U.S. economic stimulus check, which could be used to buy bitcoin and stocks, equates to a total of about $40 billion.
[Risk Warning].
US Dollar: Fed expected to unexpectedly dovish Can buy the dollar at low
Morgan Stanley research points out that if this week’s FOMC meeting is dovish, there are downside risks to the dollar in the short term. However, the bank believes that in the long term, the dollar still has upside momentum in the second quarter due to the strong U.S. economy and vaccinations, the potential for higher long-term nominal and real yields, and the possibility of more fiscal expansion in the U.S. Thus, a dovish surprise from the Fed could prove to be an attractive opportunity to buy the dollar on the downside.
Australian dollar: a mix of long and short news Australian dollar is expected to range-bound
Analysts at Westpac pointed out that the AUDUSD will be caught in a oscillating trend in the 0.76-0.80 range in the aftermath, as the fundamental news is quite long and short. On the one hand, the U.S. bond yields continue to perform strongly in the broader context, the U.S. dollar index still has further upside momentum; on the other hand, the prospect of an accelerated global economic recovery on the pull of commodity prices, supporting the commodity-based currency represented by the Australian dollar.
U.S. and Canada: Institutions are bullish on the Canadian dollar U.S. and Canadian 1.2480 can be shorted
Canadian Imperial Bank of Commerce strategists expect oil prices to remain firm in the near term, Canadian short-term Treasury yields are high, and the Bank of Canada will contract stimulus in April, suggesting shorting USDCAD at 1.2480 with a short-term target at 1.2250 and a stop loss at 1.2590.
[Key Forecast].
20:30 U.S. retail sales may cool
The monthly U.S. retail sales rate has gradually improved in recent months, recording -0.7% in December and rebounding to 5.3% in January. U.S. retail sales rose the most in seven months in January, indicating a rebound in household demand. consumer spending rose sharply in January as the fiscal stimulus package landed late last year, though agencies predict the boom may begin to cool.
Current market expectations are for a monthly U.S. retail sales rate of -0.5% in February. If the figure meets or exceeds expectations, the dollar index is expected to gain support. Conversely, if it is lower than expected, the dollar index may suffer a blow.
But the U.S. economic data in February was generally positive, with a better-than-expected monthly CPI rate and a 379,000 increase in non-farm payrolls, the largest increase since October last year; the unemployment rate was recorded at 6.2%, a new low since March last year. Therefore, one needs to be alert to the possibility of better-than-expected retail sales, which in turn will support the dollar.
Wednesday 04:30 API crude oil inventories may continue to increase
Last week, API reported that US crude oil inventories increased by 12.792 million barrels. The subsequent release of the EIA showed a 13.798 million barrel increase in crude oil inventories, and financial blog Zero Hedge commented that WTI crude oil futures continued their intraday rally despite a second consecutive week of significant increases in crude oil inventories. Analysts at brokerage PVM said little can match the economic recovery in the post-Epidemic era when it comes to boosting oil market sentiment. In addition, the impact of storm-driven demand and production issues is expected to continue to be reflected in the data.
By the end of the week, the market expects that U.S. API crude oil inventories may increase by 2.715 million barrels for the week ending March 12. If the release is larger than expected, oil prices may come under pressure; conversely, oil prices may rise.
This is because OPEC+ oil producers are limiting supply and because vaccinations are accelerating, igniting hopes for a stronger economy and fuel demand. In addition, data show that China’s industrial production accelerated in January-February and was better than expected, with daily refinery processing volumes up 15% from a year earlier. This indicates strong demand. In this is the U.S. passed a massive stimulus package, raising the outlook for global economic growth. In bearish news, some analysts say Washington is considering tax increases on businesses, high-income earners and fuel to finance a comprehensive infrastructure plan, which could dampen oil demand. There is also the expectation that the winter storm that hit Texas last month may continue to increase crude oil inventories, which is weighing on oil prices. All in all, crude oil will face resistance in the short term, but remains bullish in the long term.
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