[Market Review].
The 7-year U.S. bond auction results were unsatisfactory. This week, the U.S. Treasury conducted three Treasury auctions with a total size of more than $180 billion.
The bid multiple for the $60 billion two-year U.S. bond conducted on Tuesday reached 2.54, higher than the previous month’s 2.44, with strong demand for subscriptions. However, the next two days did not go so well. Wednesday’s $61 billion five-year bond bid multiple of 2.36 was slightly lower than the six-month average bid multiple of 2.38, while yesterday’s $62 billion seven-year bond auction also did not go well. U.S. bond yields rose in response to the bid multiple of 2.23, below the six-month average of 2.28. Thankfully, this knee-jerk rise quickly stabilized, suggesting that the nervousness will be effectively absorbed, Zero Hedge commented.
As a result, the 10-year U.S. bond yield saw several upward trends this week, but quickly fell back and is now hovering around 1.63%.
The dollar index oscillated higher. This week’s focus was on speeches by several important figures in addition to the three U.S. bond auctions. Fed Chairman Powell and U.S. Treasury Secretary Yellen attended U.S. congressional hearings this week. And last week after the interest rate resolution in the press conference said the same thing. Powell said the Fed will continue to support the economy until the recovery is more robust. Inflation will rise temporarily this year, and did not express too much concern about the rise in U.S. bond yields. And other Fed officials also made similar remarks.
Last night, however, Powell said that the Fed will reduce bond purchases as the economic recovery and goals make substantial progress. Powell’s speech, slightly “hawkish”, we can continue to pay attention to Powell after whether to release more signals.
In addition, this week Yellen mentioned the potential tax policy changes, said to raise the tax rate is appropriate. However, in his first presidential press conference, President Joe Biden, who is the main promoter of tax policy, did not mention tax increases, but mentioned the infrastructure bill, Epidemic prevention and control, and other issues.
Biden said the next major initiative is to rebuild infrastructure and will announce more details about the infrastructure stimulus bill during his trip to Pittsburgh next week. Biden said the $1.9 trillion stimulus, which will allow the U.S. economy to grow at 6 percent by the end of this year, will be the next step in pushing U.S. domestic investment in technology and technology back up to 2 percent of GDP. On the vaccine front, Biden announced that he will meet his goal of 200 million doses of the new crown vaccination within 100 days of taking office.
On the data front, economic data released this week showed that U.S. GDP growth reached 4.3% in the fourth quarter of last year, which was higher than expected, while the number of U.S. first-Time jobless claims came in at 684,000, better than the expected 730,000. The positive performance of the data also seems to confirm the Fed officials’ claim that the economy is gradually recovering. This supported the dollar.
In addition, the dollar was also boosted by the strong risk aversion this week. The Turkish lira fell sharply after the former central bank governor was dismissed in Turkey; the New Zealand government introduced a package of policies aimed at tackling high housing prices; the New Zealand dollar fell in response. All of these risk events prompted capital flows to the safe-haven dollar. The U.S. dollar index has shaken higher this week as a result.
Gold was narrowly oscillating. Next, let’s focus on gold. A stronger dollar weighed on gold. However, safe-haven sentiment also supported gold. As a result, gold oscillated narrowly this week mainly around $1730.
The euro continued to weaken. On the non-U.S. currencies. The dollar strengthened, while non-US currencies were generally under pressure. The euro was under pressure against the dollar this week, as the European epidemic continued to weigh on the euro.
The British pound was weak. The euro was under pressure, and the pound was no exception. The British pound oscillated lower against the dollar this week. A possible EU ban on vaccine exports to the UK weighed on the pound.
U.S. oil oscillated broadly. Finally, a look at the oil market. U.S. oil was broad-based this week. Oil prices were higher after last week’s decline, boosted by concerns that Crude Oil shipments could be disrupted when a giant cargo ship, the Chang Chi, ran aground in the Suez Canal.
However, analysts generally believe that the Suez Canal news will only have a short-lived positive impact. A shipping source and eyewitnesses said that the “Chang Chi” has partially refloated and moved along the canal’s shoreline, which means that waterway traffic will resume soon.
Previously, Bloomberg reported that the best chance of “rescuing” the Chang Chi may have to wait until Sunday or next Monday when the tide rises. Currently, traders around the world are watching the rescue of the stranded cargo ship.
As the rescue progresses, oil prices are pulling back after a big rally. It is important to note that the Suez Canal blockage was just an accident and for now we still need to focus on the European outbreak and the upcoming OPEC+ meeting next week.
[Risk Warning].
USD: US economy may be beautiful USD will get support
Bank of America foreign exchange strategists pointed out that in early March, the dollar rose to the highest level since the end of November last year, and the upward trend of U.S. interest rates are closely related. Looking ahead, the bank expects that the performance of the U.S. economy in 2021, may greatly exceed that of the euro zone, the dollar will see an uptrend this year.
Euro: negative factors highlight the euro fear of falling to 1.16
A strategist said that the arrival of the third wave of the epidemic in Europe, relatively low vaccination rates, and insufficient fiscal stimulus will likely lead to the economic recovery in the eurozone lagging behind North America by 2-3 months. In this context, he expects the euro to fall to 1.16 against the dollar in the coming month.
Australian dollar: the economic recovery is hot Australian dollar up to 0.79
Westpac said that from a technical point of view, the Australian dollar against the dollar is at an important juncture, with no significant support between the February 2 low of 0.7564, and the 200-day moving average near 0.7370-0.7375, but if the dollar index pauses its rally, the Australian dollar against the dollar should be able to build a bottom around 0.76. In the medium term, the upside target for AUDUSD still points to 0.79 and above as the world recovers from the epidemic in tandem.
Key Outlook
20:30 U.S. PCE data for February may show bright performance
First, to focus on the United States will be released PCE data. CNBC commented that the new round of U.S. stimulus program has led to the largest monthly increase in personal income since April 2020, and inflation remains moderate. Personal income rose 10 percent, higher than the 9.5 percent increase expected by the agency. Congress approved $600 in personal economic assistance funds for millions of Americans, and consumers got the funds and quickly spent them, driving retail sales to soar that month. By the time the data was compiled in February it could be seen that retail sales plunged, recording -3%, CPI was better than expected, non-farm payrolls increased by 379,000, the largest increase since last October; and the unemployment rate recorded 6.2%, a new low since last March. Overall, February’s data showed signs of a rebound.
Currently, the market expects the U.S. core PCE price index for February at an annual rate of 1.5%, 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 0.1%. You need to take into account the impact of these two sets of data on the dollar index.
Saturday 01:00 U.S. oil drilling total fears increase
Next, take a look at the total number of U.S. oil drilling. The data released last week was 318. The total number of drilling wells continues to rise, indicating the recovery of the U.S. economy and increasing the expectations of extractors for economic recovery.
Currently, the market expects the total number of oil drilling in the U.S. to the week of March 26 to 322, if the published value is greater than expected, or bearish oil prices; conversely, will be positive oil prices.
Although the Suez Canal congestion crisis has not been lifted, but need to be alert, once the navigation, oil prices may be suppressed. In addition, because Europe ushered in the third wave of the epidemic, as well as blockade measures, oil market fundamentals are short, oil prices risk bias to the downside, you should also pay attention.
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