[Market Review].
The dismal non-farm payrolls hit the dollar hard. Data released on Friday showed that non-farm payrolls increased by 266,000, far less than the expected 1 million. After the release of the data, the dollar index fell sharply, approaching the 90 mark, hitting a new low in nearly two and a half months.
Earlier, a number of Federal Reserve officials spoke intensively, in unison in support of low interest rate policy. And the non-farm payrolls data unexpectedly significantly less than expected, further reinforcing the view that the Fed will not raise interest rates early or reduce the size of bond purchases.
In addition, the dismal non-farm payrolls data also means that the Biden administration’s trillion dollar stimulus plan may have changed. Some analysts say the jobs data reinforces, rather than bridges, the positions already held by both sides. Democrats see the danger of a delayed economic recovery. Republicans, on the other hand, believe government guarantees will discourage people from working. Republican lawmakers and some business groups say that overly generous government benefits have greatly reduced the willingness of workers to return to work.
Gold is moving up strongly. Next, let’s focus on gold. Gold jumped more than $60 last week, posting its biggest weekly gain since November, and at one point strongly surpassed $1,840. Weak U.S. nonfarm payrolls data, as well as the generally dovish stance of Federal Reserve officials, helped gold soar. However, the concern is that the gradual easing of the epidemic in Europe and the US may limit gold’s rally.
Silver rallied sharply. Silver has also seen a wave of gains. Just this past week, silver climbed from $25.80 all the way to near $27.70, a weekly gain of 6%.
The euro stood at the 1.21 handle. While the dollar weakened, non-U.S. currencies were generally stronger. For most of last week, the euro fluctuated mainly in the 1.1980-1.2060 range against the dollar. However, the dismal non-farm payrolls weighed on the dollar, while the euro gained support, and the euro stood on the 1.21 mark against the dollar instantly.
The British pound broke strongly above 1.40. The trend of the pound is roughly similar to that of the euro, which also saw a spike after a period of narrow fluctuations. Currently, GBPUSD is mainly trading around 1.4040. Nevertheless, we still need to be alert to the volatility risks of the pound, such as the second referendum in Scotland and the ruling crisis of British Prime Minister Johnson. After a series of scandals came to light, analysts generally believe that Johnson is facing a crisis in power, which is likely to endanger his prime ministership.
U.S. oil has two weekly positive streaks. Finally, a look at the oil market. Following the previous week’s gains, U.S. oil continues to shake out to the upside and is currently running near $65. This is largely supported by optimism that the economy is restarting. The easing of movement restrictions in the U.S. and Europe, the resumption of plant operations, and vaccinations have paved the way for a recovery in fuel demand. In addition, the sharp pressure on the US dollar also helped oil prices to record gains. On top of that, a ransomware attack on the largest U.S. pipeline operator of refined oil products and an explosion on a tanker in Syria also favored oil prices.
However, the outbreaks in India and Japan are still quite serious, and a quick return to the nuclear deal between the U.S. and Iran is expected, which could limit oil price movement afterwards.
As oil prices rally, the number of active rigs has been growing moderately. Data released last week showed that the number of active oil and natural gas rigs in the U.S. rose by eight, the most since April 2020. We can also keep an eye on the data to see if it continues to grow – after all, it is an early indicator of future production.
[Risk Warning
Gold: Dollar fears continued pressure Gold expected to return to uptrend
Analysts at the financial website DailyFX reviewed the economic data released last week, and there is reason to believe that the Fed will not taper its easing in the near term at least until there is a significant change in the situation, such as a continued positive jobs report and a significant uptick in inflation. As investors look for investment targets that avoid negative real interest rates, the dollar fears continued pressure, thus favoring gold prices.
Euro: Europe and the United States are currently in trouble, but is expected to resume the uptrend
Societe Generale said that the euro is currently in trouble against the dollar. The dollar rebounded in the first quarter of this year because of the popularity of vaccines and fiscal stimulus measures to make the U.S. economic growth is expected to rise, but these have been priced in. The next volatility in the dollar is expected to come when markets reprice Fed policy in 2022 and the outlook for global growth. The bank expects that Europe and the U.S. should resume their uptrend soon, followed by a full-blown weakening of the dollar, but both outcomes are unlikely to happen for now.
Japanese Yen: U.S. bond yields are consolidating sideways U.S. and Japanese are expected to range in the short term
National Australia Bank pointed out that against the backdrop of Japan’s economic weakness, the dollar carried out a further uptrend against the yen. It is expected that the fluctuation range for the rest of the year is mainly in the range of 107-112. However, in the short term, as the U.S. bond yields still seem to be in a consolidation state, it is expected that the U.S. yen will fluctuate narrowly in the range of 108-110.5.
[Key Outlook].
Tuesday OPEC released its monthly crude oil market report: crude oil production is expected to increase in April
First of all, let’s pay attention to the monthly crude oil market report to be released by OPEC. Last month, OPEC published a monthly report showing that OPEC crude oil production increased by 200,000 barrels per day in March. The report, meanwhile, revised upward the growth rate of global crude oil demand to 5.95 million barrels per day in 2021.
By April, a Reuters survey, showed that oil production rose in OPEC members led by Iran, with the largest decreases in Venezuela and Libya. OPEC members kept their production cut commitments, reducing their share to 123% in April from 124% in March. OPEC’s oil production increased by 100,000 barrels per day in April from a year earlier, rising to 25.17 million barrels per day.
The current epidemic remains a major factor weighing on oil prices, and a new wave of epidemics is rapidly sweeping through more and more countries in South and Southeast Asia as India’s new crown epidemic worsens. Currently, six countries around India are seeing a significant rise in new crown cases. WHO recently noted that in the past week, India accounted for nearly half of the world’s new crown cases and a quarter of the world’s new deaths. There is also a need to keep an eye on the US-Iran negotiations, which could also drag on oil prices.
Wednesday 14:00 UK Q1 GDP preliminary annual rate: fears of continued contraction
Moving on to the UK’s first quarter GDP data. In the second quarter of last year, British GDP hit the bottom, and the data gradually improved in the third and fourth quarters. The fourth quarter recorded -7.3%. A financial website commented that the modest rise in the data reaffirmed the resilience of the UK economy, despite the fact that the country was in the midst of the November embargo. Economic conditions may have taken a hit in the first quarter due to tightened epidemic restrictions, but the outlook for the second quarter of 2021 looks bright because of the rapid rollout of the vaccine.
Currently, the market expects the preliminary annualized UK GDP for the first quarter to be -6.1%, which may be positive for the pound if the published value is better than expected; conversely, it will be negative for the pound.
At the same time, the UK will release March GDP data. U.K. GDP rose 0.4% in February from a year earlier, as the prospect of a mass vaccination program and easing of epidemic restrictions boosted consumer confidence. With the declining number of new cases in the U.K. and the continued easing of epidemic restrictions, U.K. GDP will continue to grow modestly in March, with the market expecting a 1.3% increase.
Wednesday 20:30 U.S. April unadjusted CPI annual rate: may continue to strengthen
Eyes turn to the U.S. to see that the U.S. will release the monthly CPI rate for April. Last month’s unquoted CPI was released at an annual rate of 2.6%. Some commentators say that the U.S. CPI in March hit the largest increase since 2012, further evidence that inflationary pressures are increasing as the economy recovers and demand strengthens.
The Fed’s 2% inflation target tracks the core PCE price index, which reached 1.8% in March and is just a step away from the stated 2% target. Fed Chairman Jerome Powell and many economists believe that the rise in inflation is temporary and that the supply chain is expected to adjust accordingly and become more efficient. Supply constraints mainly reflect a shift in demand from services to goods during the outbreak.
Current market forecasts for CPI to soar to 3.6% in April imply that rising raw material prices and sharply higher freight rates will continue to drive rising prices for downstream consumer goods. At the moment, Brazil, Chile, India and other emerging countries are tired of dealing with the domestic epidemic, which will inevitably cause a further decline in the export of raw materials, which is also an important reason for the high prices of raw materials in the United States.
Currently, the market expects the U.S. April unquarterly CPI annual rate of 3.6%, if the published value is greater than expected, or favorable to the dollar; conversely, it is negative to the dollar.
In addition, the monthly CPI rate will also be released at the same time, and the market is expected to be 0.2%. If both sets of data are said to be strong, the dollar index may strengthen.
Friday 20:30 U.S. monthly retail sales rate for April: or a slight increase
On Friday, the U.S. will release the monthly retail sales rate for April. The monthly U.S. retail sales rate has been volatile in recent months, falling to -3% in February and surging to 9.7% in March. Some agencies commented that U.S. retail sales rebounded sharply in March as Americans received additional aid checks from the government and increased vaccination numbers allowed the economy to restart more broadly, solidifying market expectations for strong growth in the first quarter. At the same time, rising temperatures and rapidly improving sanitation conditions have allowed more restaurants to offer food service.
The market expects retail sales to return to modest growth in April. The University of Michigan Consumer Confidence Index rose in April’s final reading, with about 64% of consumers saying the economy is doing well. More respondents also cited job growth. This data is expected to maintain an upward trend as consumer confidence is increasing as vaccinations accelerate and more states and businesses reopen.
Currently, the market is expecting a 0.2% monthly rate of U.S. retail sales in April. If the data meets or exceeds expectations, the dollar index is expected to gain support. Conversely, if it is lower than expected, the dollar index may suffer a blow.
Recent data released by the U.S. are good performance, retail sales may also be better than expected, the dollar is expected to gain support.
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