Fundamental Analysis Morning Market Review 05 March 2021

Mar 05, 2021


EUR is declining against USD during today’s Asian session, developing a strong downward momentum that returned to the market last Wednesday, and renewing local lows from December 1, 2020. Uncertain macroeconomic statistics from the eurozone put pressure on EUR yesterday. The volume of retail sales in January fell by 5.9% MoM after growth by 1.8% MoM in the previous month. Analysts had expected a decline by 1.1% MoM. In annual terms, sales fell by record 6.4% YoY, while market forecasts were for a decline of only 1.2% YoY. In December, sales increased by 0.9% YoY. At the same time, the unemployment rate in the eurozone in January remained at the same level of 8.1% (in December the figure was revised downwards from 8.3%), contrary to forecasts of its growth to 8.3%. Investors are focused on the February statistics on the US labor market today.


 GBP is trading in different directions against USD during today’s morning session, consolidating near the local lows, updated at the beginning of the week. GBP is declining, retreating against the background of the general strengthening of USD practically across the entire spectrum of the market. Some support for GBP on Thursday was provided by the macroeconomic statistics from the UK on business activity. Construction PMI in February rose from 49.2 to 53.3 points, which turned out to be better than the expected 51 points. At the same time, analysts also drew attention to the growth of the average yield on 10-year bonds in the UK from 0.441% to 0.868%. The issue of the rapid growth of bond yields in various countries has been of increasing concern to the markets lately. Some regulators, such as the European Central Bank and the Reserve Bank of Australia, have already spoken out in favor of methods to curb yield growth.


 NZD remains under pressure and shows a moderate decline against USD during today’s Asian session, updating local lows since early February. The instrument is declining amid the publication of not the most confident macroeconomic statistics from the US on Thursday. The number of Initial Jobless Claims for the week ending February 26 rose again from 736K to 745K, which, however, turned out to be better than the expected 750K. Continuing Jobless Claims for the week ending February 19 decreased from 4.419M to 4.295M, while the forecast assumed an increase to 4.3M. Factory Orders index turned out to be positive increasing by 2.6% MoM in January after growing by 1.6% MoM in the previous month. Analysts had expected the increase by 2.1% MoM. In addition, investors hesitate to open new positions ahead of the February US labor market data release on Friday, given the recent ADP private sector employment report.


 USD is showing strong gains against JPY, hitting record highs since July 1, 2020. Investors continue to show high interest in “safe” assets, responding to the controversial situation in the bond market and fearing the introduction of new measures from leading financial regulators. In particular, the attention of market participants on Thursday was focused on the speech of the US Fed Chair, Jerome Powell. The Chairman of the American regulator made a very optimistic speech, practically without touching upon the urgent topic of growth in the yield of US Treasury bonds. The official noted that the early opening of the economies will lead to a noticeable increase in inflation, which serves as one of the main guidelines for maintaining minimum interest rates. Immediately after Powell’s speech, bond yields rallied again, pushing the major Wall Street indices down.


 Gold prices are slightly declining during today’s Asian session, hitting record lows since June 8, 2020. The day before, the instrument’s position was under pressure from the yield on American bonds, which resumed growth after the neutral speech of the Fed Chair, Jerome Powell. Additional pressure on gold quotes was exerted by news from the US Senate, where it was decided to postpone the discussion of a bill on new stimuli for the American economy in the amount of USD 1.9 trillion to the end of next week.