[Market Review].
The dollar index is falling more than once. Following the previous day’s decline, the dollar index continued to extend its losses yesterday and has now fallen to around 91, refreshing a new low since March 4.
Since the first 3 months of this year, the dollar index has rebounded by 4%. The positive factors behind the rally include five main ones: a vaccine for the U.S. epidemic and an economic recovery with relative advantages, rising U.S. bond yields, fiscal stimulus and its expectations, rising U.S. stocks and rising risk aversion.
However, the positive effects of several factors have recently started to fade, depressing the dollar index. The good vaccine process in European countries has weakened the relative advantage of the US. Second, U.S. bond yields are in consolidation, which also makes it difficult to give strong support to the dollar index. The new round of fiscal stimulus is still a long way from landing, and it is also difficult to help the U.S. economic recovery in the short term. At present, there are still many differences within the United States on Biden’s infrastructure plan. In this regard, Biden is willing to compromise on the bill and discuss the issue in the coming months. U.S. government officials revealed that the time for Congress to pass the bill will be in mid-July. In addition, the current Fed officials’ statements, the United States will remain low interest rates for a period of time, which also caused pressure on the dollar index.
Gold rose and then fell. The dollar index is declining, gold is shockingly higher, once upward approaching $ 1790. However, then the U.S. bond yields rose slightly, gold fell back to a high level, currently hovering around $ 1770.
Silver retreated to a higher level. Silver moved roughly similar to gold, starting to fall after hitting $26.2 and now trading around $25.8.
The euro broke strongly above 1.2. In non-US currencies. After the background of dollar weakness, non-US currencies are collectively stronger. The euro rose more than 60 points against the dollar, strongly breaking the 1.2 mark, the highest level since March 4. This reflects expectations that the accelerated pace of vaccine rollout will boost the ECB’s outlook for the economy.
The British pound is approaching the 1.4 mark. The pound’s rally was no less impressive. The pound rose more than 140 points against the dollar during the day, the largest gain among G10 currencies. The UK’s swift vaccination program and reopening schedule continue to boost investor confidence.
U.S. oil edged higher. Finally, a look at the oil market. U.S. oil is slightly higher on the day and is currently running near $63.40. Oil prices are supported by a weaker dollar. However, the gains in oil prices are limited by market concerns that a rise in the number of new crown cases in India will weigh on demand. For now, we can look forward to the OPEC meeting.
[Risk Warning
British pound: boosted by the UK economic outlook, GBPUSD may test 1.40
With the rapid advance of the new crown vaccination program, the British service sector is restarting, while at the same time the US inflation reflation trade theme cooled down, the pound broke through the 50-day average against the dollar, hitting the biggest one-day gain since December 23. In this context, some foreign exchange analysts said that the pound against the dollar or will again test the 1.40 line.
Japanese yen: the market is temporarily no positive factors U.S. and Japanese short-term fear of downside
Morgan Stanley believes that in the U.S. bond yields consolidation, the global recovery is expected to remain unchanged in the background, the dollar against the yen in the short term there is downside risk. In addition, the bank expects the Bank of Japan’s balance sheet to expand to ¥778 trillion by the fourth quarter of 2021.
Australian dollar: the Australian dollar continued to strengthen, still need to be alert to the risk of pullback
Recently, the Australian dollar has been shaking up against the U.S. dollar. Credit Suisse believes that the currency pair has now broken upwards through the key position of 0.7757, after which it may open an uptrend. However, the bank also pointed out that if the AUDUSD falls below 0.7677-0.7680, it will be the first signal of a pullback, with the next support level expected to be in the 0.7586-0.7588 range. If it falls below this position, it is expected to continue to probe 0.7532, 0.7517 and the 0.7499-0.7500 area of the 50% retracement of the upside since November 2020.
[Key Outlook].
14:00 UK unemployment rate expected to rise
First, let’s take a look at the UK’s ILO unemployment rate. Unemployment data released in recent months has steadily risen, with last month’s release registering 5.1%, a new high since March 2016. Analysts expect the number of unemployed in the U.K. to surge when the government’s mandatory leave program, which pays most of the wages to millions of private sector workers, ends at the end of April as scheduled.
Currently, the market is expected to January three-month ILO unemployment rate of 5.2%, if the published value is greater than expected, or negative pound; conversely, it is positive pound.
Recently, the United Kingdom will publish a series of economic data, employment, inflation, retail, PMI and many other data, all-round test the success of economic recovery. But the more critical is the epidemic. The UK’s vaccination rate is close to 50% and has opened non-essential retail and outdoor hospitality facilities on April 12. Meanwhile, large UK companies are planning to increase hiring and investment as their confidence in profitability for the year ahead is at a record high. Market sentiment is now expected to continue to improve, which will support the pound.
Wednesday 04:30 API crude oil inventories may decrease
Next, come to focus on API crude oil inventories. Last week, API reported that US crude oil inventories decreased by 3.608 million barrels. The subsequent release of EIA crude oil inventories decreased by 5.89 million barrels, both dropping more than expected. Some analysts say that the combination of unprecedented fiscal stimulus and vaccination actions will provide a solid foundation for a recovery in oil demand, later this year.
By the end of the week, the market expects that U.S. API crude oil inventories may decrease by 2.86 million barrels for the week ending April 16. If the published value is larger than expected, oil prices may come under pressure; conversely, oil prices may rise.
Currently, there are numerous positive developments. For example, refinery capacity utilization rose to 85%, OPEC and IEA have raised their crude oil demand growth expectations for this year, and there are signs of an acceleration in the pace of vaccination in Europe. The IEA reported that OECD crude stocks fell 55.8 million barrels in February to 2.98 billion barrels, although they were still 28 million barrels above the five-year average. Overall, these positive factors are likely to continue to support oil prices.
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