[Market Review].
The 10-year U.S. bond yield rose to 1.776% at one point. Early tomorrow morning, Biden is expected to announce a $2.25 trillion infrastructure spending package. In addition, the White House press secretary hinted that the speech may also announce plans for tax increases to fund the recovery plan, with media reports suggesting that corporate taxes could be raised from 21% to 28%. After that, the White House will come out with a second plan within a few weeks that is expected to include expansion of Medicare, child tax credits and more. The massive economic stimulus package, as well as the U.S. vaccination push, bolstered expectations of a strong economic recovery from the Epidemic and pushed up U.S. Treasury yields, with the 10-year U.S. bond yield once rising to 1.776%, a new high since last January. Although U.S. bond yields are at record highs, Federal Reserve official Bostic expects the Fed will not react too much to bond yields.
The U.S. dollar index strongly broke through 93. higher U.S. Treasury yields, coupled with market optimism about the upcoming non-farm payrolls data, the dollar gained strong support and the dollar index rose strongly above the 93 mark.
Gold extended its decline. Bond yields and the strong performance of the dollar weighed on gold. Gold extended its decline, falling below four hurdles in a row and is now trading near $1,680.
The euro fell to a five-month low. The dollar strengthened, while non-U.S. currencies were generally under pressure. The euro fell more than 40 points against the dollar, hitting a new low in nearly five months. France and Germany have increased their efforts to control the new crown epidemic, making the short-term outlook for the European economy gloomy. The difference between U.S. and German Treasury yields widened to the largest since January last year, which put pressure on the euro.
The British pound came under slight pressure. Likewise, the pound was hit by a rising dollar. However, the UK is leading the way on vaccinations, limiting the pound’s decline. The British pound was under slight pressure against the dollar during the day.
U.S. oil shook to the downside. Finally, a look at the oil market. U.S. oil is under pressure to the downside intraday. The news that Saudi Arabia hinted that it would continue to extend its production cut policy once caused oil prices to rally. However, the resumption of the Suez Canal, which defused transportation bottlenecks, coupled with a global demand outlook still held back by the epidemic, weighed on oil prices. In addition, a stronger dollar has reduced the attractiveness of dollar-denominated commodities. And once-contained U.S. shale oil capacity is returning to the market, also depressing the upside of oil prices.
[Risk Warning
Crude Oil: oil price outlook is optimistic.
UBS strategists believe that while vaccination progress is currently uneven among countries, oil demand will recover to 100 million barrels per day later this year from the current 94 million barrels per day as other countries ramp up their vaccination efforts. Meanwhile, oil exporters remain committed to limiting supply, with OPEC+ expected to cut production only when demand recovers. The outlook for oil prices remains positive, with Brent expected to rise to $75 a barrel in the second half of the year.
Sterling: Vaccine benefits highlighted Sterling expected to be supported
Goldman Sachs foreign exchange analysts still believe the dollar will fall over the next 12 months, although they acknowledge that a strong start to 2021 has deflated their expectations. Meanwhile, analysts believe that the pound should benefit “tactically”. This is due to the rapid introduction of a vaccine in the UK, which has helped suppress the risk of a new coronavirus variant.
Swiss franc: U.S. Swiss may rise in the short term, targeting 0.9467
Technical analysis by Commerzbank suggests that the USDCHF maintains its rally, targeting the mid-July high at 0.9467, with the 50% Fibonacci retracement of the 2019-2021 decline at 0.9499 and the medium-term upside target at the 200-week moving average at 0.9663. On the downside, the decline should be supported at the 38.2% Fibonacci retracement at 0.9324. As long as the pair sits above the mid-March low at 0.9215, the medium-term bullish expectation remains in place.
Key Outlooks
17:00 Eurozone March CPI may have a bright performance
This afternoon, the eurozone will release CPI data. From last September to November CPI annual rate remained at -0.3%, then quickly rebounded, the previous two months of data recorded 0.9%. March data may continue to strengthen.
Currently, the market is expected to March CPI annual rate of 1.3% in the euro area, if the published value is greater than expected, or positive for the euro; conversely, will be negative for the euro.
Also released is the CPI monthly rate, the current market is expected to record 1%, much higher than the previous value, if this group of data overall positive, the euro may strengthen.
20:15 ADP employment numbers fear weak performance
The ADP chief economist said the job market continues to recover slowly across the board, with the impact of the epidemic on large companies becoming clearer and job growth in the goods-producing industries stagnant. With the epidemic still dominating, the service sector remains well below pre-epidemic levels. However, this sector is likely to be the biggest beneficiary as opening times approach and consumer confidence grows.
Some analysts predict that U.S. ADP employment may register 550,000 in March. If the data is less than expected, the dollar index may come under pressure to the downside; if it is better than expected, then the dollar index may strengthen.
It can be seen that the market is very optimistic about the U.S. labor market expectations, if the data is better than expected. The dollar index will continue to be strong.
22:30 EIA crude oil inventory increase may exceed expectations
Finally, coming to the EIA crude oil inventories, the data released last week increased by 1.912 million barrels. This morning, API crude oil inventories have been released with an increase of 3.91 million barrels. The financial blog Zero Hedge commented that the increase in API crude oil inventories exceeded market expectations, in addition to an unexpectedly large drop in gasoline inventories, but a surprisingly large increase in refined oil inventories.
Based on past experience, API inventory data and EIA inventory data have a relatively strong positive correlation, so EIA crude oil inventories may also increase.
The current market expects that the EIA crude oil inventory may increase by 400,000 barrels in the week of March 26. If the published data exceeds expectations, oil prices may dip in the short term; if the inventory data is less than expected, oil prices are expected to strengthen.
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