[Market Review].
U.S. oil surged 6%. U.S. oil rose 6% during the day, essentially recovering the ground lost the day before. The U.S. inventory report showed that domestic fuel consumption was the highest in four months, while demand for Crude Oil from Gulf Coast refineries was also on the rise. Meanwhile, a container ship previously ran aground in the Suez Canal, an incident that is feared could lead to disruptions in crude shipments, boosting oil prices higher after last week’s decline. However, analysts generally believe that the news from the Suez Canal will only have a short-lived positive impact.
There are still bearish factors for oil prices. Although German Chancellor Angela Merkel withdrew her decision to impose a tough five-day blockade, the Epidemic continues to rebound in Germany as well as other European countries, and overall, Europe is still in an atmosphere of tightening anti-epidemic measures, which may have a corresponding negative impact on oil demand. In addition, earlier Federal Reserve Chairman Powell said “some asset prices are really too high”, also suppressed risk sentiment.
The market can now focus on the OPEC meeting on April 1, which will decide on crude oil production in May. According to four OPEC+ sources, OPEC+ oil producers may make a decision similar to the March meeting when production was largely kept steady.
The 5-year U.S. bond tender is sounding another alarm bell. On top of that, the second U.S. Treasury auction this week also caught the market’s attention. Overnight, the U.S. Treasury auctioned $61 billion in 5-year Treasuries. The bid multiple for this sale was 2.36, slightly lower than the six-month average bid multiple of 2.38.
Zero Hedge commented that such a result is clearly worse than Tuesday’s 2-year U.S. bond bid. All things being equal, it suggests that tomorrow’s 7-year U.S. bond sale could face some serious “headwinds,” especially considering that yesterday’s U.S. bond sell-off again pushed the 10-year yield up to 1.65% quickly.
The dollar index continues to oscillate to the upside. Next, let’s focus on the dollar index. Yesterday, Fed Chairman Jerome Powell and U.S. Treasury Secretary Yellen continued to appear before the U.S. Congress for hearings. Powell reiterated his testimony from the previous day’s hearing that the Fed will continue to support the economy until the recovery is more robust. Inflation will temporarily rise this year, and there is no excessive concern about rising U.S. bond yields. Yellen then again mentioned tax increases, saying that we levy very little tax on companies and that it is appropriate to raise tax rates.
Meanwhile, a number of Fed officials spoke during the day. Regarding interest rate hikes, Fed official Williams was optimistic about the U.S. economic recovery, but declined to predict when to raise rates. Another official, Bostick, on the other hand, expects the Fed to enter a rate hike in 2023. Overall, Fed officials are still confident in the U.S. economic recovery, but still have a long way to go.
At present, countries re-implemented the anti-epidemic embargo, while the United States led the global recovery of confidence, risk aversion is strong, the dollar index also received a boost, continue to shock upward.
Gold prices rose slightly. In gold, gold prices rose slightly during the day, ending two consecutive days of declines. On the one hand, there are signs that the rise in U.S. Treasury yields may be weakening. On the other hand, gold prices were supported by safe-haven buying as a third wave of outbreaks emerged in Europe and the blockade was extended.
The euro is under pressure to the downside. Moving on to non-U.S. currencies. The dollar strengthened and non-U.S. currencies were generally under pressure. The euro fell by more than 20 points against the dollar during the day. Earlier released in Germany and France in March Markit manufacturing PMI preliminary value are stronger than expected, the euro against the dollar short term only slightly up less than 10 points.
The British pound hit a new one-and-a-half month low. Similarly, the British pound fell 60 points against the dollar during the day, hitting a one-and-a-half-month low. This comes after data showed that the U.K. inflation rate unexpectedly fell in February. The UK inflation rate fell to 0.4% in February from 0.7% in the previous month.
[Risk Warning
British pound: the economic outlook is bullish Sterling is expected to strengthen further
Danske Bank pointed out that under the support of rapid vaccination, the United Kingdom is gradually re-opening, coupled with businesses are adapting to the new British-European trade relations, the British economy is expected to outperform the eurozone this year, the euro against the pound will fall to 0.8299 within three months, within six months back to 0.8403. However, the bank also said that the pound has been up for some Time, digesting a lot of good Factors, the pound will not be surprised if there is a certain pullback in the near future.
Euro: Europe and Japan in the near future fear to continue to fall concern about the target 127.80
Citi foreign exchange strategists said that the euro against the yen in the recent downtrend penetrated the key technical levels. After falling below the 10-day moving average, the pair continued to fall below the 21-day moving average near 129.30. Against this backdrop, the EURJPY may continue its descent. The next target is the 50% retracement of the rally since January at around 127.80. The longer-term downside target is at 124.50, the 38.2% retracement of the rally since May.
New Zealand dollar: negative factors highlighting the New Zealand dollar is expected to continue to weaken
Institutional analysis says the New Zealand dollar continues to languish against the U.S. dollar, falling to a new four-month low. The New Zealand government announced a series of measures to cool the housing market, easing pressure on the New Zealand Federal Reserve to raise interest rates, seen as a key factor that continues to weigh on the New Zealand dollar. On top of that, widespread risk aversion benefited the U.S. dollar and further pushed money out of the riskier New Zealand dollar. Investors have become cautious against the backdrop of a surge in the number of new coronavirus infections and a series of new blockade measures in Europe. From a technical perspective, a drop below the psychological barrier of 0.7 sets the stage for further weakness.
[Key Outlook].
17:00 Lagarde is hardly new tricks
First, look at ECB President Lagarde’s speech. The ECB’s net settlement of bond purchases rose by €21.1 billion last week, the most since early December last year. Lagarde said that the near-term outlook remains fraught with uncertainty because vaccination progress is lagging behind that of the U.K. and the U.S. The pace of purchases will be adjusted at any point in time depending on the situation. She also said that the ECB will take all appropriate measures to support the economic recovery and is prepared to adjust all tools if necessary.
Taken together, Lagarde may reiterate that the economic outlook is fraught with uncertainty and that all measures will be taken to recover the economy and will adjust tools as needed.
In addition she will also say that the pace of bond purchases will be adjusted according to the situation. However, some ECB officials have said that accelerating bond purchases is only a temporary move and will be reassessed in June when the latest economic forecasts are available.
20:30 U.S. Q4 GDP growth rate expected to retrace
Next up, the U.S. will release its fourth-quarter GDP data. GDP rebounded sharply in the third quarter of last year, recording a revised value of 33.1%. Institutional commentary says the U.S. economy grew at a record pace in the third quarter, fueled by the receipt of more than $3 trillion in bailout funds. However, as last year came to a close, the U.S. economy appeared to have lost momentum as cases of new coronary pneumonia surged and fiscal stimulus tapered off.
The market expects that the final annualized quarterly rate of U.S. real GDP in the fourth quarter was 4.1%, which may be positive for the dollar if the published value is better than expected; conversely, it will be negative for the dollar.
In addition, U.S. personal consumption expenditures and the final annualized quarterly core PCE price index will be released at the same time. If this set of data is overall beautiful, the dollar index is expected to gain support.
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