Morning Market Review 18 March 2021
EUR is declining against USD during today’s Asian session, correcting after a significant increase the day before, which was triggered by the publication of moderately optimistic minutes of the US Federal Reserve meeting. As expected, the American regulator did not change the parameters of monetary policy, indicating that rates will remain at their lowest levels until the end of 2023. At the same time, forecasts for the growth rate of US GDP have significantly increased. At the end of 2021, the Fed expects the US economy to grow by an impressive 6.5% YoY, while the December forecast assumed growth of only 4.2% YoY. Wednesday’s macroeconomic statistics from eurozone did not have a noticeable impact on the instrument’s dynamics. The Consumer Price Index in February in the region showed an increase by the previous 0.2% MoM, and in annual terms it added 0.9% YoY, which also corresponded to the market forecasts. Today, European investors are focused on the speech of the European Central Bank President Christine Lagarde and ECB Vice-President Luis de Guindos.
GBP is showing flat trading dynamics against USD, consolidating near 1.3950 after a noticeable increase the day before. USD was under pressure on Wednesday from the results of the US Federal Reserve meeting, which were not marked by an adjustment to the soft monetary policy, despite a noticeable increase in the yield of Treasury bonds in the last month. At the same time, the American regulator reacted to the appearance of more optimistic macroeconomic statistics in February-March and raised its own forecasts for the growth rate of US GDP for the next few years. British investors today are awaiting the outcome of the Bank of England meeting, which, probably, will not bring any noticeable changes in the vector of monetary policy. Analysts predict that all 9 board members will support keeping rates at their current lows.
AUD is showing strong gains against USD in today’s Asian trading, updating local highs since March 3. The instrument adds about 0.40% and is testing the level of 0.7830 for a breakout. AUD is supported by strong macroeconomic statistics from Australia in addition to the rather vulnerable positions on USD. The released report on the Australian labor market in February reflected a sharp drop in the unemployment rate from 6.3% to 5.8%, which was significantly better than the market’s neutral forecasts. The employment rate in February increased from 29.5K to 88.7K, exceeding expectations at the level of 30K. At the same time, full employment added 89.1K, and part-time employment decreased by 0.5K.
USD shows multidirectional dynamics of trading against JPY during today’s Asian session, consolidating below the level of 109.00. The day before, the instrument showed a moderate decline caused by the publication of the minutes of the US Federal Reserve meeting. The regulator raised its forecasts for the growth rate of the US economy in 2021, while not responding to the recent rise in Treasury yields, still believing that this will not cause a sharp increase in inflationary pressures in the markets. At the same time, weak export statistics from Japan exerted moderate pressure on JPY on Wednesday. In February, export volumes fell sharply by 4.5% YoY after growing by 6.4% YoY in the previous month. Analysts had expected negative dynamics at –0.8% YoY. Foreign Bond Investment indicator for the week ending March 12 fell sharply by JPY 417 billion after rising by JPY 111.7 billion in the previous period.
Gold prices are showing uncertain growth during today’s morning trading session, updating local highs since the beginning of the month. The strengthening of the instrument was facilitated by the results of the meeting of the US Federal Reserve, which became known the day before. As expected, the American regulator confirmed its commitment to low interest rates at least until the end of 2023, simultaneously raising its own forecasts for the dynamics of US GDP growth for the next few years. The issue of the yield of US Treasury bonds again remained without due attention. The Chair of the regulator, Jerome Powell, does not see a threat to the current inflation rates, hoping that the target level of 2% will be reached soon.