Last week the U.S. dollar finally surrendered to the positive sentiment prevailing in the world. As stock markets in both the U.S. and Europe hit new all-time highs, investors sold the U.S. dollar and opted for riskier currencies expecting higher returns.
U.S. data was very strong and showed positive sentiment in the economy and its recovery. The manufacturing PMI index jumped to 64.7 points, from 60.8 last month and a market forecast of more than 61.5, the best result since 1983. The ISM service PMI index rose to 63.7 points, well above 55.3 last month. This month’s result was the highest in history since the index data collection began in 1997. The growth of the producer price index reached 4.2% and was the highest since 2011 and suggested growing price pressure from the industrial sector. The number of new jobless claims fell slightly from 0.79 to 0.74 million a week.
The global spread of the coronavirus continued to accelerate and the weekly average rose from 586 to 638 thousand cases per day. The situation in the U.S. has stabilized and the weekly average was 68 thousand, compared to 66 thousand new cases per day last year. The number of vaccines injected in the country rose from 158 to 179 million, a change of 21 million and moderately faster than the previous week. In the United States as a whole, the number of people vaccinated with at least one dose rose from 30.7% to 34.5% of the population and increased by almost 4% in a week. Globally, the number of people receiving at least one dose in U.K. rose from 47% to 48%, while in Lithuania the figure rose from 13.5% to 16.6%, which was the best week. With the certification of new vaccine plants in Europe, vaccine supplies will increase to 360 million in the second quarter of 2021, or about 3.5 times the first quarter of the year, which is likely to vaccinate about half of Europe's population and significantly reduce the spread of the virus.
The main currency pair EUR/USD reflected the increased risk appetite in the market and investors were active buyers of the euro, when the pair rose from 1,175 to 1,190. Among the economic data in Europe were the service sector PMI indices, which were mostly in the neutral zone: Germany 49.6 points, France 48.2. In Italy 48.6. In general, sentiment in Europe is positive and improving, with the rapid vaccination of society expected to make the Old Continent’s economy recover rapidly in 2021 and show growth. The EUR/USD pair closed the week appreciating +1.2%.
The top Asian pair USD/JPY retreated from 12-month highs and fell from 110.7 to 109.6 points, briefly reaching as high as 109.0. Among the economic data was the service sector PMI index, which stood at 48.3 points. Household consumption fell by -6.6% year on year, but confidence grew to 36.1 points and was the highest since March 2020. USD/JPY ended the week with a fall of -0.9%.
The GBP/USD pair rose to 1,390 points at the beginning of the week, but later adjusted to 1,370 points and showed the opposite trend to the general sentiment in the market. There were few important economic data, among which the services sector index was 56.3 points and showed optimism. GBP/USD ended the week trading down -0.9%.
This week will start with retail data from Europe, with Chinese exports and other international trade data expected on Tuesday, as well as industrial production in Britain, data from the German and European ZEW economic indices and U.S. inflation figures. European industrial output will be monitored on Wednesday, U.S. retail and industrial production volumes on Thursday, and investors will monitor key Chinese industrial and trade indicators and European inflation on Friday.
According to Admiral Markets market sentiment data, 26% of investors have long positions in the EUR/USD pair (down 42 percentage points from last week). In the main Asian pair USD/JPY, 37% of investors have long positions (up 11 percentage points). In the GBP/USD pair, 68% of participants expect a rise (up 33 percentage points). Such market data is interpreted as contraindicative, so EUR/USD and USD/JPY are expected to appreciate and GBP/USD to depreciate. 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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