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Daily Analysis Report 04 Mar '2022

Daily Analysis Report 04 Mar '2022


During the Asian session, the euro fell sharply against the US dollar, forming a “bearish” trend since last Tuesday and reaching record lows not seen since May 2020. Tensions in Ukraine, where Russia has been conducting a special military campaign since late February, continue to pressure the single currency. Western countries have imposed broad economic sanctions against Russia, even though the restrictions will negatively impact it. Many central bank representatives have already reported a likely slowdown in economic development, which could be reflected in the monetary policy vector.

Given the balance of external economic threats, the US Fed’s Chair, Jerome Powell, indicated that the regulator might refuse to boost the rate at its March meeting. At the same time, global inflation is accelerating, posing a severe danger to the economic recovery’s resilience. According to eurozone statistics released yesterday, the Producer Price Index increased from 3% to 5.2 percent in January, although economists projected a drop to 2.3 percent. Producer prices rose 30.6 percent year over year in January, compared to 25.3 percent in December. The “bulls'” positions on the euro on Thursday were only bolstered by figures on the eurozone’s unemployment rate. In January, the figure dropped from 7% to 6.8 percent.


During the morning session, the British pound is trading in a decline versus the US dollar, stabilizing about 1.3330. Despite the lively news backdrop, investors prefer to wait for the release of major macroeconomic statistics in the United States, so “bearish” action remains muted. The February labor market report will be released today. Still, given the current crisis in Ukraine and an unprecedented flurry of sanctions against Russia, it can only have a secondary impact on the market. The present forecasts, in one way or another, are quite optimistic.

The market anticipates a 400K increase in nonfarm payrolls and a moderate improvement in average hourly earnings. For the first time in a long time, the unemployment rate may go below the psychological level of 4%. The Markit Construction PMI data is scheduled to be issued in the United Kingdom during the day.


In Asian trade, the New Zealand dollar rose slightly versus the US dollar, attempting to consolidate above the psychological level and significant resistance at 0.6800. Market activity is still modest as investors await the important February US labor market report release. Furthermore, considering the sensitive situation in Ukraine, some investors prefer not to open new positions towards the end of the week. The US macroeconomic numbers released the day before put moderate downward pressure on the dollar’s position. The numbers on company activity triggered the market’s worst disappointment.

The ISM Services PMI declined from 59.9 to 56.5 points in February, despite experts expecting a small gain to 61 points. In the same period, the ISM Services Employment Index declined substantially from 52.3 to 48.5, contrary to expectations of a rise to 53.5. At the same time, the manufacturing sector has been more stable thus far: Factory Orders increased by 1.4 percent in January, more than doubling their value from December.


During the Asian session, the US dollar traded in a range versus the Japanese yen, settling near 115.30. Investors are taking their time buying the US dollar, preferring to wait for today’s release of the US labor market report for February. Traders are hoping to confirm the probability of an interest rate hike during the US Federal Reserve’s March meeting. However, given the deterioration of the situation resulting from the fighting in Ukraine, the US regulator is likely to alter its original intentions. The latest release of US business activity data, which reveals a fast decrease in sentiment, particularly in the services sector, is another cause for alarm.

Today’s data released in Japan has no substantial impact on the instrument’s dynamics. The country’s jobless rate unexpectedly increased from 2.7 percent to 2.8 percent in January, but this is still a relatively low figure, especially when compared to unemployment rates in several European countries. In January, the Jobs/Applicants Ratio climbed from 1.16 to 1.2.


Gold prices are expected to stabilize Asian trading on Friday, with perhaps a minor increase later in the week. The instrument is still bolstered by the events in Ukraine, which prompted Western countries to impose harsh sanctions on Russia. Investors are attempting to diversify their portfolios, favoring safer assets in the face of rising tensions. As a result of its popularity as a safe-haven currency, the US dollar gains favor. Market traders are waiting for the release of a report on the US job market for February, hoping to get more clues about the US Federal Reserve’s likely tightening of monetary policy in March. Earlier this month, the chairman of the regulator, Jerome Powell, told the US Congress that he did not rule out the agency’s possibility to take a wait-and-see approach during a meeting at the end of March.

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