U.S. dollar still fails to catch a stride

Positive sentiment remained in the financial markets last week, stock index prices fluctuated in the highs, and the U.S. dollar continued to depreciate as investors opted for riskier currency alternatives. The U.S. dollar index recorded its third negative week in a row.

USD

U.S. economic data remained extremely positive. The preliminary PMI index was at 60.6 points in the manufacturing sector and 63.1 points in the services sector. The country’s secondary asset market sales in March were 6.0 million a year, and that was another slightly slower month. The real estate market is gradually reducing volumes from the November high of 6.9 million sales. Meanwhile, new home sales were as high as 1.02 million a year and that was another high in the last 15 years. The number of new jobless claims fell from 0.58 to 0.55 million a week.

The overall situation of the coronavirus in the world continued to deteriorate, with the weekly average of new cases rising from 743,000 to 816,000 per day. India contributed the most to this trend, with exponential growth and more than 300,000 new cases a day. There is also talk of a triple-mutated form of the virus in India that is more contagious than before. The U.S. situation, meanwhile, was better, with the weekly average falling from 71,000 to 62,000 new cases a day. The number of vaccines injected in the country rose from 202 to 222 million and the change was 20 million, stable with the average for recent weeks. Overall, the number of people vaccinated with at least one dose in the U.S. rose from 39.0% to 41.3% of the population and increased by 2.3% over the week. Globally, the number of people in England who received at least one dose rose from 49% to 50%, while in Lithuania the figure rose from 20.1% to 22.4%, less than before, as many vaccines were used for the second shot.

Euro

The major currency pair EUR/USD continued to rise and ended the week at 1,210 points. Among the economic data in Europe were preliminary PMI indices, which stood at 63.3 points in manufacturing sector and 50.3 points in the services sector, and both suggested a positive sentiment among business participants. At the meeting of the European Central Bank, it was decided not to change the monetary program and both interest rates and bond purchases remained unchanged. The next meeting of the bank will take place in June, with more hints of a gradual reduction in the stimulus program as the pace of vaccination gains momentum and the economy gradually opens up. The EUR/USD pair closed the week appreciating +1.0%.

JPY

The top Asian pair USD/JPY, continued to depreciate gradually, reaching a low of 107.5 on Friday, the lowest level since early March. Economic data included Japanese export volumes, which rose 16.1% year-on-year in March. Annual inflation remained negative at -0.2% in March, but shows an upward trend over the last 4 months. Preliminary PMI indices were 53.3 points in industry and 48.3 points in services. USD/JPY ended the week with a decline of -0.9%.

GBP

The British pound and the U.S. dollar started the week appreciating to 1,399 level, but lost most of the gain in the remaining days and ended the week at 1,387 points. Among the important economic data were the labor market results, which showed an increase in the number of unemployed by 10 thousand, and the unemployment rate was 4.9%. Annual inflation was 0.7% in March, while retail sales grew by as much as 7.2% year-on-year in March. GBP/USD ended the week appreciating +0.3%.

Economic Events

This week will start with the German Ifo business climate index and U.S. industrial orders data. The meeting of the Bank of Japan and the U.S. Consumer Confidence Index will be monitored on Tuesday. On Wednesday, investors will watch the decisions of the U.S. Federal Reserve meeting and the press conference. German labor market indicators and preliminary inflation, as well as preliminary U.S. economic growth in the first quarter, are expected on Thursday. Data on Japanese industrial production, Germany's preliminary first-quarter economic growth and European preliminary inflation are scheduled for Friday.

According to Admiral Markets market sentiment data, 15% of investors have long positions in the EUR/USD pair (down 13 percentage points from last week). In the main Asian pair USD/JPY, 59% of investors have long positions (up 13 percentage points). In the GBP/USD pair, 40% of participants expect a rise (up 18 percentage points). Such market data is interpreted as contraindicative, making EUR/USD and GBP/USD likely to appreciate and USD/JPY depreciating. 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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