Weekly Market Outlook: All eyes on the ECB this week

March 08, 2021 12:30

Volatility surged higher in global markets last week as investors focus on rising bond yields from an improving US economy. With a strong employment report last week, the US dollar will be widely watched this week even though Federal Reserve Chairman Jerome Powell has tried to calm markets down over higher interest rates. 

Trends could accelerate even further with the announcement over the weekend of US President Joe Biden’s $1.9 trillion stimulus bill being passed by the US Senate. 

However, it’s now up to the European Central Bank (ECB) to share its plan on how they will navigate the volatile moves in bond markets. The ECB Press Conference is on Thursday at 1.30 pm GMT and could have huge consequences for the euro and European stock markets. 

Traders will also be watching the Bank of Canada (BOC) Rate Statement on Wednesday, its accompanying press conference and the Canadian employment report on Friday. The Canadian dollar has been one of the strongest currencies in recent weeks due to rising oil prices so could be set for an increase in volatility this week. 

You can learn more about some of the global themes affecting the markets in this selection of education articles:

Weekly Forex Calendar

Source: MetaTrader 5 trading platform provided by Admiral Markets

 

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Trader’s Radar - ECB Press Conference

The European Central Bank (ECB) releases its latest interest rate and monetary policy statement report on Thursday 11 March. The ECB press conference will follow 45-minutes later at 1.30 pm GMT. While no changes are expected in policy, the central bank is facing a huge problem with rising bond yields in the United States. 

As investors become more optimistic about the US recovery, the forecast for an interest rate rise to happen sooner increases. Rising interest rates increase borrowing costs for businesses and consumers which could slow down the economic recovery. While this is happening in the US, it has also pushed European yields higher which is not what the ECB want. 

The economic picture looks much better than the EU’s which has been slow to roll out the coronavirus vaccine. The US is also on the verge of a huge stimulus plan while there are no such plans of one in the EU. All eyes will be on ECB comments regarding their concern about rising yields and if they are planning to do anything about it.  

Source: Admiral Markets MetaTrader 5, EURUSD, Weekly - Data range: from Aug 25, 2013, to Mar 6, 2021. Performed on Mar 6, 2021, at 7:00 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

 

The long-term, weekly price chart of the EUR/USD is showing signs of a potential trend reversal. After surging higher from the lows of the coronavirus pandemic in March 2020, the price has spent much of this year moving lower as more flows go back into the US dollar. 

If the current market activity remains the same, it’s a sign that traders are anticipating a much better economic recovery in the US. That could cause traders to exit the euro and move back into the US dollar causing further downside potential. If sellers remain in control, the 1.1615 horizontal support level is likely to be in focus. 

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Corporate Trading Updates and Stock Indices

Global stock market indices continued their declines last week as investors remain concerned over the potential for higher interest rates. This increases borrowing costs for businesses which can hurt long-term growth. 

However, the moves have been uneven around the world with US markets feeling the pain the most. European indices have remained much more resilient with most moving sideways. A late bounce in global indices at the end of the last week could start the beginning of a potential push higher. 

Volatility levels remain elevated in US indices but the falls in price could attract long-term dip buyers, especially with the announcement of the $1.9 trillion stimulus deal passing through the US Senate. 

Source: Admiral Markets MetaTrader 5, SP500, Daily - Data range: from Jun 3, 2020, to Mar 6, 2021, performed on Mar 6, 2021, at 6:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

 

Past five-year performance of the S&P 500: 2020 = +16.17%, 2019 = +29.09%, 2018 = -5.96%, 2017 = +19.08%, 2016 = +8.80%, 2015 = -0.82%.

The S&P 500 stock market index is still trading above its 100-period exponential moving average (green line) suggesting the long-term trend is still up. If price can move back up above the 20-period exponential moving average (blue line) then this represents a more bullish scenario.   

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