Fundamental Analysis Morning Market Review 01 April 2021
Morning Market Review:
EUR is showing flat trading dynamics during today’s Asian session, consolidating in anticipation of new drivers in the market. The day before, the instrument strengthened slightly, retreating from the lows since November 2020. This was facilitated by technical factors as well as profit taking on USD ahead of Friday’s publication of the US labor market report for March. Macroeconomic statistics from Europe remained neutral, which, coupled with the difficult epidemiological situation in the region, creates a very depressing picture for EUR. The Core Consumer Price Index in the euro area in March slowed down from +1.1% YoY to +0.9% YoY, while the forecasts suggested an increase in the index to +1.2% YoY. The unemployment rate in Germany remained at 6% in March, while the change in the number of unemployed slowed sharply from –37K to –8K, which, however, turned out to be better than market expectations at –3K. Today, investors are focused on the German retail sales statistics for February, as well as data on business activity in Europe from Markit.
GBP is trading in different directions against USD during today’s Asian session, developing flat dynamics in the short term. The positions of GBP were supported yesterday by the positive macroeconomic statistics from the UK. According to the updated data, the UK GDP grew by 1.3% QoQ in Q4 2020 against an increase of 1% QoQ according to previous estimates. In annual terms, the UK economy lost 7.3% YoY, which also turned out to be better than the previous results at –7.8% YoY. The instrument is supported by the optimistic epidemiological situation in the country, as well as expectations of store openings starting on April 12.
AUD is trading lower against USD today, being near the local lows of February 2. Investors are opening new short positions ahead of Friday’s US labor market report, which is expected to show very optimistic results. The data from ADP on the level of employment in the private sector released yesterday reflected an increase in the number of new jobs in March by 517K after an increase of 176K in the previous month. Analysts predicted an increase by 550K. Macroeconomic statistics from Australia, published today, do not provide significant support to the instrument. At the same time, AiG Manufacturing PMI in March continued to grow and strengthened from 58.8 to 59.9 points. In turn, the volume of exports from the country in February fell sharply by 1% after growing by 6% in January. In contrast, imports gained 5% over the same period after a 2% decline. This led to a noticeable decrease in the trade surplus in February from AUD 10.142 billion to AUD 7.529 billion.
USD is consolidating against JPY today, continuing to hold near the record highs, updated the day before. Market activity is gradually declining, given the upcoming Easter holidays, but investors are awaiting the publication of the US labor market report for March, which will take place on Friday. Market forecasts suggest a marked increase in the number of new jobs created by the US economy outside the agricultural sector. The unemployment rate may also decline and reach 6%. In the meantime, moderate support for JPY on Thursday is provided by relatively positive macroeconomic statistics from Japan. Tankan Large Manufacturing Index in Q1 2021 rose from –10 to 5 points, which turned out to be significantly better than market expectations at 0 points. Jibun Bank Manufacturing PMI rose from 52 to 52.7 points in March.
Gold prices are showing a slight increase during today’s morning session, developing the “bullish” momentum formed the day before, when the instrument managed to retreat from its local lows. The reason for the emergence of the uptrend was the correctional sentiment in the market, as well as the proximity of the Easter holidays, which increased the urge of investors to take profit. At the same time, gold is still under pressure from a strong USD and rising US Treasury yields. The instrument is controversially influenced by yesterday’s speech by US President Joe Biden, who outlined his plan to modernize American infrastructure worth more than USD 2 trillion. So far, only the general features of the grandiose reform have been presented, which should affect various aspects of the US economy, and also, according to Biden, will strengthen national security and withstand global competition with China.