[Market Review].
10-year U.S. bond yields rose slightly. The U.S. Treasury Department conducted an auction of $58 billion three-year Treasuries and $38 billion 10-year Treasuries on Monday. The results showed that the overall three-year auction was solid, while the 10-year was lukewarm. Market reaction to this is not much, 10-year U.S. bond yields rose about 1.3 basis points. On Tuesday, the U.S. Treasury will bid for $24 billion in 30-year Treasuries, so we can keep an eye on that.
The dollar index fell slightly. Next, let’s focus on the dollar index. The dollar index fell slightly during the day. St. Louis Fed President Bullard hinted that the Fed may start discussing QE tapering after 75% of Americans have been vaccinated. 22% of Americans have now completed their vaccinations. In the short term, traders are waiting for the upcoming U.S. inflation and retail sales data to further set the direction.
Gold fell for the second day in a row. In precious metals, gold fell for a second day in a row and is currently trading near $1,730. Higher bond yields following the issuance of U.S. Treasuries are weighing on gold prices.
Silver fell more than 1%. Compared to gold, silver seems to have fallen more, losing 1.8% during the day and currently running near $24.8.
The euro broke the 1.19 handle. Let’s look at non-U.S. currencies again. The euro fell and then rose against the dollar during the day, ushering in a rebound after hitting a low of 1.1871 to break the 1.19 handle.
The British pound rose 30 pips. In the British pound, the pound rose 30 pips against the dollar. Stores in England reopened after a three-month blockade. However, analysts warned that the boost to the pound from Britain’s lead in the vaccine race may be short-lived as other countries catch up.
U.S. oil rose and then fell. Finally, a look at the oil market. U.S. oil rose and then fell during the day, hitting a high of $60.74 an ounce. Among the positive factors are: Boston Fed President Rosengren said the U.S. economy may rebound sharply this year; meanwhile, geopolitical tensions boosted oil prices. According to the latest report of the Russian satellite news agency, the Houthis in Yemen claimed to have launched an attack on Saudi Arabia using 17 drones, of which 10 were used to attack Saudi Aramco’s oil refinery. In addition to this, renewed tensions between the U.S. and Iran have also supported oil prices. According to foreign media reports, officials from the U.S. and Iran, argued over which sanctions the U.S. should lift. In addition, the good vaccination process is also favorable to oil prices. According to Reuters Vaccine Tracker data, 22% of the U.S. population has completed vaccinations, compared to 11% in the UK. However, other countries are not doing well, with about 6% of the population in France and Germany having completed vaccination.
The current exponential growth in the number of new cases of crown pneumonia globally is a major negative factor for the oil market.
Overall, the progress on the U.S.-Iraq sanctions issue, vaccination and the geopolitical situation are positive for oil prices in the short term. However, in the long term, the surge in new crown infection cases, the implementation of new anti-epidemic blockade measures in the Middle East and parts of Europe, and a steady recovery in demand on a global scale are far from coming, limiting oil prices from rising significantly.
[Risk Warning].
British pound: the pound may usher in a rebound in 1.3764 can do more
In recent times, the pound has been under significant pressure against the dollar, once below the 1.37 mark. However, Citigroup said that although the pair made a new low in the current downtrend, it has now started to rebound. Based on this, the bank recommends going long GBPUSD at 1.3764, with an initial target of 1.3919 and an extended target of 1.4170; stop loss at 1.3650.
Japanese yen: the U.S. and Japanese may still fall, fearing a downward test of 109
Commerzbank technical analysis pointed out that the dollar against the yen last week fell to the 23.6% Fibonacci retracement of the previous rally 109, the point withstood the initial test, but is not sure whether the corrective decline is over, it is still possible to fall to the March 10 low of 108.41 and the March 23 low of 108.34, and may fall further to the 38.2% Fibonacci retracement of the previous rally 107.77. On the upside, a break above 110.97 would likely continue the rise.
New Zealand dollar: the cyclical rise in risk New Zealand dollar is expected to be supported
ANZ Bank said that the recent economic data released by the United States should perform positively. Stronger U.S. economic growth favors all global cyclical assets, including the New Zealand dollar and Asian currencies. Meanwhile, New Zealand’s economy is in good shape and should pose greater support for the New Zealand dollar during a cyclical rise in risk. Technically, the NZDUSD is likely to rise to 0.7100-0.7190; posing support in the 0.6703-0.6900 range.
Key Forecast]
20:30 US March CPI continues to strengthen
First, take a look at the U.S. will release the monthly CPI rate for March. The data released last month recorded 0.4%. Institutional commentary said that because of improved public health and gradually rising demand for services such as air travel, the U.S. CPI rose solidly in February, recording the largest annual increase in a year, yet underlying inflation remained lukewarm. Barclays senior economists expect that by May, the overall U.S. inflation rate could be as high as 3.6%. Consumer demand for goods has remained strong following the passage of the stimulus bill last December and will see another round of rising demand going forward, which will keep core goods prices strong. The services sector may also face an uptick in demand.
The data is likely to continue to pick up by March. A compilation of March data reveals that PPI recorded a monthly rate of 1%, well above expectations; ISM non-manufacturing PMI hit a record high; non-farm payrolls increased by 916,000 and the unemployment rate fell to 6.0%. The improving labor market indicates that economic activity continues to recover.
Currently, the market expects the U.S. March quarterly CPI monthly rate of 0.5%, if the published value is greater than expected, or positive for the dollar; conversely, it is negative for the dollar.
In addition, the annual rate of March unadjusted CPI will also be released at the same time, and the market is expected to be 2.5%, much higher than the previous value. If both sets of data are said to be strong, the dollar index could strengthen.
TBD OPEC crude oil production expected to increase in March
Next, let’s focus on the monthly crude oil market report to be released by OPEC. Last month, OPEC released its monthly report showing that OPEC crude oil production decreased by 650,000 barrels per day in February. At the same time, the report raised its forecast for global crude oil demand growth in 2021 and non-OPEC overall supply growth.
By March, energy consultancy JBC expected OPEC crude oil production to increase by 142,000 barrels per day to 25.295 million barrels per day in March. That compares with a Reuters poll that projected an increase of 180,000 barrels per day.
Last week, OPEC+ announced it would gradually increase production; Saudi Arabia also said it would phase out additional production cuts in the summer. In addition, the U.S. rig count has increased to 337, meaning U.S. crude production will continue to pick up. While it is still challenging for the U.S. and Iran to return to the Iran nuclear deal, a Reuters survey showed that Iran’s oil supply increased by 210,000 barrels per day in March. All of this suggests that oil market supply will continue to increase.
Wednesday 04:30 API crude oil inventories may decrease
Next, come to focus on API crude oil inventories. Last week, the API reported a 2.168 million barrel decrease in U.S. crude oil inventories. Then the EIA crude oil inventories were released with a decrease of 3.522 million barrels, both decreasing more than expected.
By the end of the week, the market expects that U.S. API crude oil inventories may decrease by 2.154 million barrels for the week ending April 9. If the published value is larger than expected, oil prices may come under pressure; conversely, oil prices may rise.
Currently, the U.S. rig count has increased to 337, meaning that U.S. crude oil production will continue to pick up. The US fiscal stimulus plan, however, will boost crude oil demand.
Wednesday 10:00 New Zealand Fed expected to stay put
Finally, pay attention to the New Zealand Federal Reserve will announce the interest rate resolution. The Fed’s February resolution statement will keep the benchmark interest rate unchanged at 0.25% and maintain the large-scale asset purchase program at NZ$100 billion. The New Zealand Fed further noted that the extension of monetary stimulus is necessary, no changes to the loan program at this time, and said that the future economic outlook is uncertain and inflation and employment will remain below the medium-term target.
The New Zealand Fed expects CPI to be 2.5% in the second quarter of 2021, GDP to contract by 0.3% in the first quarter, and GDP to grow at a rate of 0.3% in the second quarter.
We expect the New Zealand Fed to stay put, focusing on any changes to its asset purchase program. It is also important to keep an eye on the New Zealand Fed’s attitude towards bond yields. If the Fed is not worried about higher yields, the New Zealand dollar is expected to strengthen.
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