U.S. dollar consolidated
The value of the U.S. dollar fluctuated quite significantly last week, especially during the U.S. Federal Reserve meeting, but the reserve currency did not show any sustainable trend and the index remained in a consolidation range.
U.S. data were positive, although not everything was in-line with expectations. Retail sales grew 6.3% year-over-year and the pace remains one of the fastest since 2012. Statistical growth is likely to pick up further in the coming months as the comparative base was very low a year ago due to the first wave of the pandemic and panic. Industrial production in February was -4.3% lower than a year ago, suggesting a slowdown in the sector's recovery, as the annual change in January, was -2.0%. The number of new jobless claims remains stable at 0.77 million a week.
With the signing and launch of the 1.9 trillion stimulus program, sentiment and future expectations among market participants continue to improve - Goldman Sachs forecasts that economic growth will reach 8% per year in the fourth quarter of 2021, the fastest pace since 1951.
A meeting of members of the U.S. Federal Reserve was also held. It decided not to change interest rates and leave the pace of buying 120 billion bonds a month unchanged. Members have been more conservative than Wall Street banks on economic growth and expect the country’s economy to grow by 6.5% in 2021, but this will only put temporary pressure on inflation to rise to 2.4%, which is expected to return below 2% later.
The pandemic trend has prompted a renewal in the spread of the virus worldwide, from a weekly average of 418,000 to 462,000 a day. Interestingly, the situation in the U.S. has been able to resist global changes for more than a week, and the U.S. continued to record a declining number of infections, with the weekly average falling from 57 to 56 thousand new cases per day. The number of vaccinations injected in the country has risen from 101 million to 118 million, a change of 17 million, and the United States is one of the largest countries to vaccinate its population. Overall, the number of people vaccinated with at least one dose in the United States rose from 19.9% to 23.3% of the population. Globally, the number of people receiving at least one dose in Israel rose from 56% to 57%, in the United Arab Emirates from 60% to 64%, in England from 35% to 39%, and in Lithuania from almost 9% to 10%.
The main currency pair EUR/USD consolidated in the range between 1.19 and 1.20 levels. There was not much economic data published in Europe, among which significant attention was drawn to the European ZEW Economic Sentiment Index, which was at 74.0 points and rose to 6-month highs. The EUR/USD pair closed the week with a fall of -0.4%.
The most important Asian pair USD/JPY continued to maintain its consolidation sentiment and moderately retreated from the 9-month high. Economic data included a change in export volumes in February, which fell -4.5% year-on-year, and industrial production, which was -5.2% lower than a year ago. There was also a meeting of the country's central bank, which focused on the members' decision to significantly increase the range of 10-year bond yields to 0.25% in both directions from 0%, which is now the bank's target. The country’s bank regulates the yield curve’s yield and the goal is to keep it at 0%. USD/JPY ended the week with a fall of -0.1%.
GBP/USD pair also moved in the range between 1.38 and 1.40 points. There were no relevant economic data. GBP/USD ended the week depreciating -0.4%.
This week will start relatively calmly and sales data on the U.S. secondary real estate market will be monitored on Monday. Britain’s labour market indicators and U.S. new home sales figures will be expected on Tuesday. On Wednesday, the focus will shift to preliminary data on manufacturing PMI indices and the head of the U.S. Federal Reserve will deliver a report to Congress on the country’s economic situation. No important news was scheduled on Thursday, and the German Ifo business index will be monitored on Friday.
According to Admiral Markets market sentiment data, 51% of investors have long positions in the EUR/USD pair (up 8 percentage points from last week’s data). In the main Asian pair, USD/JPY, 24% of investors have long positions (up 4 percentage points). In the GBP/USD pair, 69% of participants expect a rise (up 10 percentage points). Such market data is interpreted as contraindicative, so the USD/JPY is expected to rise, the GBP/USD to fall and the EUR/USD situation to be in the neutral zone. The analysis of positioning data needs to be combined with fundamental projections and technical analysis.
Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com
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