Daily Analysis Report 07 Mar '2022

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EnclaveFX
Mar 07, 2022
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EUR/USD  


During the Asian session, the euro fell sharply against the US dollar, hitting new lows not seen since May 2020. The worsening situation in Ukraine, where a special military campaign launched by Russian President Vladimir Putin has been ongoing since the end of February, continues to impose pressure on the single currency’s position. European countries actively implement new sanctions against Russian businesses, which is bound to damage business sentiment.

Energy prices, particularly for gas, continued to grow substantially simultaneously. The eurozone’s macroeconomic numbers released last Friday were cautiously positive. After increasing by 2.1 percent in December, retail sales in the eurozone grew by 7.8% in January. Market projections predicted a far higher rate of increase, at 9.1 percent. Sales increased by only 0.2 percent every month, after decreasing by 2.7 percent the previous month. Analysts predicted a 1.3 percent increase.

GBP/USD

During the morning session, the British pound is trading in a decline versus the US dollar, updating local lows from December 20, 2021. The instrument is building a strong “bearish” momentum that began to form on March 3, when the situation in Eastern Europe reawakened. After declaring a special military operation in Ukraine at the end of February, demand for the hazardous pound has been under pressure. Western countries criticized Russia’s conduct, prompting broad sanctions against Russian businesses. As a result, investors began to seek out safer assets, affecting the exchange rate of the pound, euro, and other currencies.

Meanwhile, the Markit Construction PMI in the United Kingdom, released on Friday, increased from 56.3 to 59.1 points in February, despite analysts expecting no changes. During the week, the market will be focused on Friday’s UK statistics on GDP and Industrial Production dynamics in January. According to traders, strong macroeconomic indications are expected to allow the Bank of England to carry out previously announced plans to tighten monetary policy in 2022. The market anticipates up to five 25-basis-point rate hikes.

AUD/USD

In Asian trading, the Australian dollar is active against the US dollar, upgrading local highs from November 4. Even though the US dollar remains strong due to sustained demand for safe assets, the AUD/USD has established a confident “bullish” momentum for the fourth session in a row. On Friday, a positive report on the labor market for February was released, bolstering the dollar’s “bullish” position towards the close of the week. Nonfarm Payrolls grew by 678K in February, following a 481K gain in January, whereas estimates predicted a result of 400K.

At the same time, the unemployment rate decreased from 4% to 3.8 percent, which was better than market predictions of 3.9 percent. In February, however, the Average Hourly Earnings showed no movement, contrary to projections of a 0.5 percent gain. The indicator decreased from 5.5 percent to 5.1 percent annually, with predictions of a 5.8% growth.

USD/JPY

In Asian trading, the US dollar trades in a rage against the Japanese yen, stabilizing around 115.00. Although the released report on the US labor market indicated a large increase in Nonfarm Payrolls of 678K, average expectations did not expect an increase of more than 400K, USD/JPY closed trading on Friday with a somewhat active gain. The dollar and the yen remain in high demand as Russia continues to execute a special military campaign in Ukraine, despite Western countries imposing unprecedented sanctions against Russian businesses. Traders anticipate the release of Japanese statistics on Consumer Credit Change in February today. During the day, January’s Labor Cash Earnings and Trade Balance figures will be released.

XAU/USD

Gold prices have been rising steadily from August-September 2020, hovering around all-time highs and approaching heavy resistance above 2000 dollars per troy ounce. The demand for gold is projected to remain stable as the situation in Ukraine worsens and the broad rise in inflation, which, due to the deterioration of ties between Western countries and the Russian Federation, can only worsen, particularly when it comes to energy prices. Oil prices are already moving in a favorable direction, while natural gas prices in Europe are approaching new highs.

The potential of the world’s top central banks tightening monetary policy in 2022 puts some pressure on the instrument’s position. First and foremost, investors anticipate a hike in interest rates from the Federal Reserve of the United States, followed by the Bank of England. So far, the European Central Bank (ECB) has maintained a cautious attitude, and any rate hikes will only be possible in the second half of 2022.