[Market Review].
The US dollar index made another record high. The week started off with a highly leveraged fund blowout that led to margin calls and impacted the results of several banks, including Credit Suisse and Nomura. Given the structure of the global banking sector and the depth of its interconnectedness, the risk could spread. This has triggered a mood of concern in the market, with investors seeking safe-haven in the more financially liquid U.S. dollar. In addition, the U.S. Dallas Fed Business Activity Index recorded 28.9, much higher than the expected 14.5, which also posed a positive for the dollar. The U.S. dollar index oscillated higher during the day.
The ten-year U.S. bond yield broke above 1.72%. In addition, this Friday will be released in March non-farm payrolls data, the market again focus on economic growth and inflationary potential, ten-year U.S. bond yields therefore rose to a new high in the recent past, intraday breakthrough 1.72%. Federal Reserve Governor Waller said that there is still a long way to go before interest rates are raised. Yields will not rise in a “bad way,” but if the market becomes disorderly, the Fed will react.
Gold broke below the $1710 mark. The stronger dollar and rising bond yields continued to suppress a sustainable rally in gold, dampening investor interest in gold, which fell below the $1,710 mark for the day. Gold prices suffered a heavy drop as the world’s largest gold ETF increased its position by 0.88 tons, not excluding that it was supported by some buying on the downside. However, whether from the increase itself, or compared to the previous outflows, 0.88 tons is expected to be difficult to constitute effective support for gold prices.
The British pound rose and then fell. Non-US currencies. The British pound rose and then fell against the dollar. There is news that the UK ordered 17 million doses of vaccine from the US Modena and the first batch is expected to arrive in the UK next month. There are two vaccines currently being administered in the UK, the AstraZeneca and Pfizer vaccines. The U.K.’s order of Modena from the U.S. eases a dispute between the U.K. and the EU over the export of the AstraZeneca vaccine, allowing economic restart activity to proceed effectively and helping the pound recover some of its recent losses.
The yen was largely stable. A further look at The Japanese yen. The dollar was largely stable against the yen during the day. Some analysts point out that the pullback in U.S. equity futures has pushed some safe-haven flows into the yen and has put some pressure on the dollar against the yen. However, the dollar remains well supported by an upbeat U.S. economic outlook, a good pace of vaccinations and the passage of a massive stimulus package.
The Turkish lira plunged again. Then turn your attention to the Turkish lira. The dollar briefly advanced more than 700 points against the Turkish lira on news that the Turkish president fired the deputy governor of the Turkish central bank. Previously, the country’s president fired the central bank governor, which had already made the Turkish lira experience a plunge.
The Suez Canal resumed navigation. Finally, a look at the oil market. The Suez Canal resumed navigation, although U.S. oil still closed higher, as Crude Oil market traders expect crude oil transportation delays to continue even though the Suez Canal has been opened to traffic. The chairman of the Suez Canal Authority said that canal traffic will return to normal within four days.
In addition, we have to keep an eye on the OPEC + meeting. Saudi Arabia is ready to support OPEC+ to extend oil production cuts until May and June, and also to extend voluntary production cuts, sources said. Saudi Arabia believes that global oil demand is not strong enough to restore more capacity. However, sources revealed Russia supports keeping OPEC+ crude output unchanged overall in May, but seeks a small increase in Russia’s own production in May.
[Risk Warning].
Gold: Economic recovery is expected to increase Gold may test 1700
FXTM senior research analysts said that the distribution of U.S. vaccines has increased market expectations for an economic recovery, boosting the dollar. If the dollar continues to rise this week, then it may make gold prices fall. From the current situation, the technical side of gold is bearish, and gold prices may test $ 1700, or even fall below that level.
British pound: positive factors still exist European pound concern 0.85
ING noted that the pound has better resilience than other G10 currencies in the face of a strengthening dollar as tensions between the U.K. and the EU over vaccine supply ease and the U.K.’s vaccination efforts maintain a good pace, and the market continues to see the U.K. government’s timetable for reopening the economy as realistic. EURGBP is likely to test the key support level of 0.85 within the next few days.
NZD: Citi bearish on NZD in the near term NZD fears fall to 0.6870
A week has passed since the New Zealand government announced a curb on the housing bubble and the New Zealand dollar has fallen below its 100-day moving average against the U.S. dollar. Under the current risk aversion in the foreign exchange market, Citigroup maintains tactical bullishness on the dollar, and therefore does not rule out the New Zealand dollar continuing to fall to the 200-day moving average around 0.6870 in the near future. However, from a medium-term perspective, the bank remains structurally bullish on high beta currencies such as the Australian dollar and believes the New Zealand dollar will recover from this real estate shock.
[Key Outlook].
Wednesday TBD The Fed is not worried about a brief move higher in bond yields
Today and tomorrow, Fed Governor Quarles, Atlanta Fed President Bostic, and New York Fed President Williams will speak one after another. Before that, Powell expects prices to face upward pressure in the near future, but the pressure is temporary and the Fed is committed to maintaining an average of 2% Inflation; he believes that the rise in bond yields reflects an improved economic outlook and that economic growth should be very strong in 2021. As the economic recovery and goals make substantial progress, the Fed will reduce bond purchases. His attitude toward bond purchases was unexpected by the market, as he had previously said he would maintain bond purchases, and only shifted his tone in his last speech.
In summary, Fed officials are expected to maintain optimistic expectations for economic growth, and are not concerned about inflation and bond yields temporarily higher. If the officials strengthen the Fed may reduce the bond purchase expectations, the dollar index is expected to gain support, you should also pay attention.
Wednesday 04:30 API crude oil inventories may increase
Next, let’s focus on API crude oil inventories. Last week, API reported an increase of 2.927 million barrels in U.S. crude oil inventories. This was followed by the release of the EIA crude oil inventory increase of 1.912 million barrels, both of which exceeded expectations.
By the end of the week, the market expects that U.S. API crude oil inventories may increase by 400,000 barrels for the week ending March 26. If the published value is larger than expected, oil prices may come under pressure; conversely, oil prices may rise.
The refloating of the grounded container ship Chang Chi in the Suez Canal has weighed on oil prices, but to a lesser extent because of the low volume of crude oil passing through the canal, which is still less than 5% of global supply. The current focus needs to be on the upcoming OPEC+ ministerial meeting on April 1. This follows reports that Saudi Arabia and Russia will support OPEC+ to keep production roughly unchanged in May, which will support oil prices.
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