Fundamental Analysis Morning Market Review 05 April 2021
Morning Market Review:
EUR is showing moderate gains against USD during today’s Asian session, recovering from a slight correction last Friday, when the instrument retreated from its local highs since March 29. Trading activity remains low today as European markets are closed until Tuesday for Easter. The Friday report on the US labor market for March was also ignored, but a reaction to it should be expected already with the opening of today’s American session. The report reflected a sharp increase in the number of nonfarm payrolls in March by 916K, after rising by 468K in the previous month. Market forecasts assumed an increase of only 647K. At the same time, the average hourly wages in March unexpectedly decreased by 0.1% MoM after increasing by 0.3% MoM over the previous period. Analysts had expected the positive dynamics to remain at the level of +0.2% MoM.
GBP is trading with multidirectional dynamics paired with USD, holding close to local highs since March 23. Investor activity in the market remains rather low, due to the celebration of Easter, and therefore the former drivers remain in the focus of traders’ attention. GBP is supported by very optimistic investor sentiment regarding the prospects for the recovery of the British economy. Soon, the market expects a new wave of easing quarantine restrictions in the UK, which will allow the opening of most of the stores and will contribute to the growth of trading activity.
AUD is marginally higher against USD, trading just above 0.7600. Market activity is gradually recovering as investors return from the Easter holidays, but there are still few new growth drivers. Inflation data from TD Securities provided some support to AUD on Monday. In March, the inflation rate accelerated from the previous +0.1% MoM to +0.4% MoM, which turned out to be better than analysts’ average expectations. “Bullish” activity on the instrument is constrained by a strong report on the US labor market, published last Friday. The report showed a record growth in the number of new jobs by more than 900K, which reflects the strong recovery of the American economy after a protracted period of quarantine restrictions. The Reserve Bank of Australia is to publish its interest rate decision tomorrow and hold a press conference. As before, the Australian regulator is not expected to change the vector of its monetary policy, but the comments of its representatives will be very important.
USD is flat against JPY, holding close to record highs and a new psychological resistance at 111.00. Trading activity in the market remains rather low, as European sites are still closed due to the Easter holidays. In turn, JPY is supported by the Japanese macroeconomic data. Jibun Bank Services PMI rose from 46.3 to 48.3 in March, better than most forecasts. At the same time, the index still remains below the psychological level of 50 points, which separates the growth of business activity from its stagnation. American investors will focus on statistics from ISM on business activity in the US for March. Analysts expect significant growth in all major indicators, which is likely to provide tangible support to USD.
Gold prices are consolidating after strong gains at the end of last trading week, when the instrument was supported by a decline in US Treasury yields. Last week, gold was also strengthened by Joe Biden’s plan to modernize US infrastructure, which will cost US taxpayers more than USD 2 trillion. Investors fear that such a large injection of funds into the US economy will contribute to a sharp increase in inflation in the near future, and therefore prefer to diversify their risks.