[Market Review].
US indexes rallied back above the 91 handle. U.S. bond yields started to move higher. The dollar index also rallied back above the 91 mark. The US ADP employment number in February recorded an increase of 117,000, lower than the expected 177,000. The small non-farm payrolls unexpectedly “cold”, but the market reaction is not obvious, and the impact on the dollar is not large. In terms of the stimulus bill, on Wednesday, during Senate negotiations on who would be eligible for the next round of $1,400 stimulus funds, President Joe Biden said he would support a plan to lower the income ceiling for stimulus checks to ensure that relief money goes to the families most in need of emergency funds. The plan would leave about 12 million adults without access to the money. Separately, moderate Democrats have pushed another proposal to cut supplemental unemployment benefits from $400 to $300 a week. Conflicts within the Senate Democrats underscore the difficulty of passing the stimulus bill. If the Senate makes any changes, the bill will have to go back to the House for a new vote.
Gold prices fell over $20. Next, let’s focus on gold. The “cold” small non-farm payrolls data did not give gold support. Against the backdrop of soaring U.S. bond yields and a stronger dollar, gold fell more than $20 during the day, once approaching the $1,700 mark.
Silver was under pressure to the downside. Like gold, silver was also under pressure to the downside during the day. Silver prices fell from $26.7 all the way to near $26, down 2.5% during the day.
The euro oscillated to the downside. In non-U.S. currencies, the euro fell 20 pips against the dollar during the day. Data released on Wednesday showed that the eurozone economy is almost certainly in a double-dip recession as the new crown blockade continues to hit the service sector. This weighed on the euro. In addition, a stronger dollar also weighed on the euro.
The British pound oscillated sideways. Let’s look at the British pound again. This comes after the UK government announced an expansionary budget aimed at bolstering the UK economy. The pound ended the day largely flat against the dollar at 1.3950.
U.S. oil rose over 2%. Finally, a look at the oil market. U.S. oil rose more than 2% during the day. U.S. EIA Crude Oil inventories recorded an increase of 21.563 million barrels, much higher than the expected decrease of 928,000 barrels. But this did not weigh on oil prices. Oil prices rebounded amid tensions in the Middle East and the possibility that OPEC will not consider increasing production.
[Risk Warning
British Pound: JP Morgan is bearish on the pound and the Canadian dollar is more promising
JPMorgan Chase discussed the outlook for the pound. In recent weeks, the pound has outperformed the rest of the G10 currencies. However, the pound is currently overpriced and the bank has turned tactically bearish on the pound now that interest rates are moving beyond expectations. Compared to the pound, investors have a relatively small position in the Canadian dollar, which the bank is more bullish on.
Crude oil: bull flag pattern still exists.
Credit Suisse strategists said that the current short-term adjustment in oil, but because of the persistence of the bull flag pattern, the recent decline in oil, is seen as a temporary correction before rising to a high of $ 71.75, after breaking the high of the next resistance level of $ 79.10. It is expected that the first support level for buoyant oil is $62.09, below which level it could fall back to $57.42 and continue to fall to $48-54.6.
Australian dollar: rising commodity prices Australian dollar is expected to break 0.80
BMO noted that the recently released monthly price index for Australian commodity exports, which rose to the highest level since 2013, could signal further strength in the Australian dollar, as Australia is an exporter of important commodities such as iron ore, coal and natural gas. The bank expects the Australian dollar to eventually break above 0.80 again against the US dollar.
[Key Outlook].
21:00 Disagreement within OPEC+ on April production increase
On Thursday, the 14th OPEC+ oil-producing countries will meet. According to the earlier production cut plan, OPEC+ will stick to a production cut of 7.2 million barrels per day until April. This meeting watch out if OPEC+ will raise crude oil production.
Sources said that most OPEC+ producers will consider moderate easing of production limits from April onwards, given the recent recovery in oil prices.
The sources believe that OPEC+ could increase production by 500,000 barrels per day from April without increasing inventories.
For now, Russia, the UAE and Abu Dhabi are all in favor of increasing production. But the latest news yesterday indicated that several OPEC+ members support keeping production unchanged in April. Reuters reported that OPEC+ is considering keeping crude output unchanged in April and abandoning plans for a possible production increase because of concerns about the ongoing New crown outbreak and the fragile recovery of the oil market and the global economy. So there are still variables as to whether OPEC+ will increase production in April.
In addition, Saudi Arabia’s voluntary 1 million barrel production cut will end next month, and OPEC is now gradually increasing its expectations for Saudi Arabia to start gradually resuming production increases from April. But the country is still discussing internally whether to resume this 1 million barrels per day production within a month or more. Some observers believe that Saudi Arabia may not stop its share of the 1 million barrel cut all at once, and may gradually stop production cuts.
Despite disagreements within OPEC+, analysts at the U.N. Secretariat predicted Tuesday that even if OPEC+ raises production by 2.4 million barrels a day between February and June, the maximum increase allowed by the agreement, it will still be able to clear stocks accumulated in 2020 by August.
21:30 U.S. initial claims may taper off
Next, take a look at the initial jobless claims that will be released in the US. In recent weeks, U.S. initial claims have remained above 700,000, with last week’s release coming in at 730,000, but well below the previous value. Agencies commented that the significant decrease in initial jobless claims means that the pace of job cuts in the U.S. is starting to slow as the rate of transmission of the new crown Epidemic declines and vaccination activity accelerates; the employment situation could improve significantly as more American people are vaccinated.
Currently, the market expects that the number of initial jobless claims in the U.S. for the week to February 27 will be 750,000. If the published value is much higher than expected, the dollar index may come under pressure; conversely, if the published value is less than expected, the dollar index may strengthen.
With the rapid vaccination, the U.S. labor market will gradually recover and the number of initial claims is expected to gradually decrease.
Friday 01:05 Powell is expected to repeat the old tune
Finally, take a look at the upcoming speech by Fed Chairman Jerome Powell. Last week, he said that interest rates will remain low until full employment and Inflation rises to 2%; the Fed will continue to make large asset purchases until the U.S. economy recovers further. He believes that the recovery is far from being achieved, uneven and still highly uncertain. He expects the economy to improve, possibly returning to pre-epidemic levels in the first half of the year.
Based on this, we believe that Powell may emphasize that the economy will improve, but will still keep interest rates low and maintain the asset purchase program. Also keep an eye on his views on higher US bond yields. Overall, there will be no major change in Powell’s stance, so the dollar index may come under slight pressure.
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