[Market Review].
The US Dollar Index edged lower. The U.S. Dollar Index held almost steady near the 91 handle during the day. Since late March, the dollar index has fallen nearly 3% as U.S. Treasury yields are stuck in a narrow range. Analysts said that the dollar shorts are trading cautiously ahead of this Thursday’s Federal Reserve interest rate resolution. Although no major policy adjustments are expected, investors will be closely watching Powell’s speech at the press conference. This is a risk.
We also need to keep an eye on Biden’s plan to unveil a massive tax hike on Wednesday. Tax rates for wealthy Americans on income, investments and estates are expected to be raised to the highest level in more than four decades. However, some analysts say that Biden’s aggressive tax hike plan will affect only 0.03 percent of the wealthy. In any case, Republican lawmakers are likely to oppose the tax hike en masse, and Biden may also face challenges from Democratic lawmakers.
In addition, the latest data from the U.S. Census shows that seven Democratic state House seats each decreased by one, while the Republican Party has the advantage of Texas will increase by two seats. U.S. media analysis said that, on the surface, the seat reorganization after the census, so that the Republican Party in Congress to gain a more favorable position. However, in the long run, it is unclear whether immigration is good news for Republicans. The Sun Belt states are growing in population and these states are moving in the Democratic direction or will soon become Democratic-dominated states. We can keep an eye on the news, after all, the development of bipartisan power will affect the implementation of policies.
Gold closed slightly higher. The dollar index is moving flat, as is gold. Gold prices oscillated narrowly during the day mainly in the $1768-1783 range, eventually closing slightly higher.
Silver oscillated narrowly. Turning to silver, silver was also in a state of narrow oscillation during the day, mainly trading around $26.
The euro rose and then fell. In non-U.S. currencies, the euro touched 1.2116 against the dollar once upward, then retracted the gains and now hovers around 1.2070. The survey showed that Germany’s boom judgment index improved less than expected in April, because the third wave of the new crown epidemic and industrial sector parts supply problems, slowing the pace of economic recovery in Germany.
However, analysts still focus on the general direction of the economy, that the German economy is steadily on the road to recovery from the new crown crisis. According to a person familiar with the matter, the German government has raised its GDP growth forecast for this year to 3.5% from 3% in January. The source also said the government expects economic growth to expand further modestly to 3.6% next year.
The British pound continued to recover. The pound, which is also a European currency, rose slightly by a dozen points. The pound was supported by the fact that vaccination in the UK reached a major milestone with over 50% of the population having been vaccinated at least once. The Deputy Governor of the Bank of England expects the UK economy to grow very rapidly for at least the next few quarters.
U.S. oil is slightly under pressure. Finally, a look at the oil market. U.S. oil fell slightly as OPEC and its allies said they are watching a surge in new crown cases in India, which could weaken fuel demand in India, the world’s third-largest oil importer. Meanwhile, the market was also dragged down by oversupply concerns as force majeure at the Libyan terminal was lifted. We can focus on the OPEC+ ministerial meeting in the short term.
[Risk Warning].
Euro: The euro may continue to rise Focus on the point 1.2118
The euro will continue to rise to the 78.6% Fibonacci retracement of the first quarter decline at 1.2212, the February high at 1.2243 and the annual high at 1.2350. if there is a pullback, you can watch out for 1.2070. it should be noted that if the pair is always above 1.2046. This indicates that the short-term bias is still to the upside. However, once it falls below this level, it will fall back to 1.1995-1.1990.
GBP: The pound is still undervalued and is expected to break above 1.40 this week
Recently, the UK has released good data on retail sales, PMI, unemployment rate, etc., indicating that the UK economic recovery is steadily underway. Although the number of new cases of new coronary pneumonia infections worldwide has risen again, the UK is still way ahead of the vaccination process and the recent relaxation of preventive and control measures in the UK will further boost market expectations for the country’s economic recovery.
Technically, the GBPUSD remains undervalued, suggesting that it should be able to easily break above 1.40 in the coming days, especially if the Fed’s April rate resolution stance is moderate when released on Wednesday.
Canadian dollar: a combination of positive factors Canadian dollar expected to continue to rally
According to Standard Chartered, the USDCAD has refreshed its five-week low of 1.2450, and technical signals suggest the downtrend will continue. And the fundamental outlook is set to remain consistent. U.S. economic growth, Canada’s expansive budget and the Bank of Canada’s increasingly assertive stance are favorable to the Canadian dollar. Lifting the current epidemic embargo and increasing national vaccination rates are expected to support the Canadian dollar.
The bank expects USD/CAD to test lower and possibly below the March low of 1.2360 and then the 2017-2018 low of 1.2060. On the upside, 1.2650-1.2750 can be watched.
[Key Outlook].
11:00 Bank of Japan announced interest rate resolution: or lower inflation expectations
First, to focus on the Bank of Japan’s upcoming interest rate resolution, and the release of the economic outlook report. Although price growth in Japan is expected to remain well below the target level, the BOJ is likely to maintain a wait-and-see approach to policy for some time to come after making a series of adjustments last month. The BOJ’s latest economic expectations may become a focus of attention after a new state of emergency was declared in Tokyo and other areas last week. Sources said the central bank may raise its GDP forecast due to strong exports, but may warn that the recent rebound of the new crown epidemic will dampen consumption. The outlook report may be the first formal acknowledgement that Haruhiko Kuroda will not be able to meet the 2% price target by the end of his term in April 2023.
On balance, the BOJ is expected to maintain its short-term interest rate target at minus 0.1% and its long-term interest rate target at around 0%. In addition, the central bank may lower its core consumer inflation forecast for the current fiscal year.
At the same time, also pay attention to the Bank of Japan’s concerns about financial stability, rising risks to financial stability or prompt the central bank to adjust policy. If the BOJ raises GDP expectations and lowers inflation expectations as expected, the market’s reaction is likely to be mild.
Wednesday 04:30 US API crude oil inventories for the week to April 23: expected to increase
Next, come to focus on API crude oil inventories. Last week, API reported that US crude oil inventories increased by 436,000 barrels. Then the EIA crude oil inventories released increased by 594,000 barrels, with both figures unexpectedly increasing. An energy analyst said U.S. refinery capacity utilization was 85 percent for the week ending April 9, a positive sign for production growth in the coming weeks as plants prepare for the domestic summer driving season. He believes that vaccinated Americans may increase their driving and air travel this summer, which will boost oil demand. However, global supply is expected to increase next month as OPEC+ raises production.
By the end of the week, the market expects that U.S. API crude oil inventories could increase by 375,000 barrels for the week ending April 23. If the release is larger than expected, oil prices may come under pressure; conversely, oil prices may rise.
In addition, the oil market needs to keep an eye on the global epidemic situation. While the widespread vaccination in the U.S. and the accelerating pace of vaccination in Europe will boost crude oil demand. But the rebound of the epidemic in Japan and India will dampen economic activity, which will depress oil prices.
Recent Comments