Fundamental Analysis Morning Market Review 31 March 2021

Mar 31, 2021

Morning Market Review:


 EUR has been declining against USD during today’s morning trading session, hitting record lows since early November 2020 and testing 1.1700 for a breakdown. EUR loses to USD noticeably again against the backdrop of renewed growth in the yields of US Treasury bonds, which reflect investor optimism about the recovery of the US economy. Moreover, today the markets are awaiting a speech by US President Joe Biden, who is to set out the details of a previously announced plan to change infrastructure spending, which will cost the US economy between 3 and 4 trillion dollars. On Wednesday, investors will also focus on macroeconomic statistics from Europe and the United States. The eurozone will report on the March dynamics of consumer prices, and Germany will publish a report on the February unemployment rate. In turn, the US is to publish the ADP Nonfarm Payrolls data, which will precede Friday’s labor market report for March.


 GBP is declining against USD in trading this morning session, developing a “bearish” momentum formed at the beginning of this week. Investors are again actively buying USD amid growing yields on US bonds and are responding positively to the pace of vaccination, which allows them to hope that most of the quarantine restrictions will be lifted soon. However, given the current crisis in the incidence rate in Europe, not all analysts are so optimistic. There is an opinion that a too fast economic recovery and the abandonment of most of the restrictive measures could lead the USA to a third wave of coronavirus, which judging by European indicators will not be weaker than the first two. The same can be said about the UK, where the rate of vaccination of the population is one of the highest to date. Today, investors are focused on the updated statistics on the dynamics of the UK GDP for Q4 2020, as well as the March data on Nationwide Housing Prices.


 AUD is posting weak corrective gains against USD during today’s Asian trading, supported by strong macroeconomic data from China and positive data from Australia. Building permits issued in Australia in February rose by 21.6% MoM against a decrease of 19.4% MoM in the previous month. Analysts were counting on the emergence of positive dynamics, but predicted a more modest growth of 5% MoM. In annual terms, the indicator accelerated from 19% YoY to 20.1% YoY. The Chinese statistics were more encouraging. Non-Manufacturing PMI in March rose sharply from 51.4 to 56.3 points, significantly exceeding the forecasts of strengthening to 52.6 points. NBS Manufacturing PMI for the same period rose from 50.6 to 51.9 points against the forecast of an increase only to 51.2 points.


 USD is showing solid gains against JPY, developing strong “bullish” momentum since March 24. The instrument is adding about 0.50% and is located not far from another strong resistance at 111.00, above which the pair rose a year ago. USD is strengthening across almost the entire market, responding to the renewed growth in US Treasury yields and awaiting a new plan to change infrastructure spending in the US from President Joe Biden. Today’s macroeconomic statistics from Japan turned out to be rather depressing. Industrial Production in February decreased by 2.1% MoM after an increase of 4.3% MoM a month earlier. Analysts had expected the decline by 1.2% MoM. On an annualized basis, production rates slightly improved from –5.2% YoY to –2.6% YoY, which can hardly be called strong data.


 Gold prices are declining in today’s morning session, developing a fairly confident “bearish” momentum, which was formed at the beginning of the week. The day before, the instrument showed the strongest drop in the past few weeks, which was associated with another surge in the yield of US Treasury bonds, which renewed 14-month highs. The pressure on gold is also exerted by the general optimism in the market associated with the growing pace of vaccination in the world. However, the situation with the coronavirus in Europe and South America remains alarming, which does not allow investors to fully concentrate on the positive agenda.