The U.S. dollar rose to a 3-month high
Last week was positive for the U.S. dollar, its index rose sharply and reached its highest level since the end of November 2020. It was announced over the weekend that the U.S. Senate approved a 1.9 trillion USD economic stimulus program. The plan now needs to be approved by the House of Representatives, with a vote scheduled for Tuesday, after which it will be signed by President Joe Biden. The program also includes 1.4 thousand U.S dollar benefits for many of the country’s population, which checks are expected to begin as early as the end of March if the plan is approved as planned.
U.S. data was positive. The ISM PMI index was at 60.8 points in the manufacturing and 55.3 in the service sector, both suggested very positive business expectations. Interestingly, the price component of the manufacturing index was as high as 86 points and hinted at rapidly rising inflationary pressures. 379 thousand new jobs were created in the labour market and the unemployment rate fell to 6.2%. The opening of leisure and accommodation facilities in the country had the greatest impact on job growth. The number of new jobless claims was stable at 0.75 million a week.
Central bank chief Jerome Powell told a news conference that members were ready to be patient and still have a long way to go before the bank’s goals are met. This led to a rise in the U.S. dollar and a jump in bond yields.
The global pandemic situation remained stable and the weekly average of new cases fluctuated at around 400,000 per day. The U.S. continued to show positive signs, with the weekly average cases falling from 70,000 to 62,000 per day. The number of vaccinations injected in the country rose from 73 to 85 million and the change was 12 million, indicating a stable vaccination process. Overall, the number of people vaccinated with at least one dose in the U.S. rose from 14.6% to 16.7% of the population. Globally, the number of people receiving at least one dose in Israel has risen from 52% to 54%, in the United Arab Emirates from 56% to 58%, in Britain from 30% to 32%, and in Lithuania, it is just over 7%.
The main currency pair EUR/USD reflected the strengthening trend of the U.S. dollar and the pair fell to the level of 1,190-points, the lowest since November 2020. Among the economic data in Europe were PMI indices: manufacturing reached 57.9 points and services 45.7 points. Preliminary inflation in February was 0.9% year-on-year and remained stable compared with January. European retail sales fell -6.4% in January compared to the same period a year ago. The EUR/USD pair closed the week with a -1.4% depreciation.
The top Asian pair, USD/JPY, continued to grow strongly, reaching 108.3 points at the end of the week and its highest point since June 2020. Economic data included the PMI indices: 51.4 points in the manufacturing sector and 46.3 points in the services sector. USD/JPY ended the week appreciating 1.7%.
The British pound and the U.S. dollar continued to correct and mainly reflected the appreciation of the U.S. dollar and depreciated to the level of 1.38 points. Among economic data was the PMI index: 55.1 in manufacturing and 49.5 points in services sectors. GBP/USD ended the week depreciating -0.6%.
This week will start with German industrial production in January, and the country's export data will be released on Tuesday. Actual U.S. inflation rates as of February are expected on Wednesday, and on Thursday the focus will be on the European Central Bank meeting, decisions on further stimulus and a press conference. Industrial production data for Britain and Europe are scheduled for Friday.
According to Admiral Markets market sentiment data, 80% of investors have long positions in the EUR/USD pair (increased +13 percentage points from last week’s data). In the main Asian pair USD/JPY, 16% of investors have long positions (fell by -9 percentage points). In the GBP/USD pair, 47% of participants expect a rise (down 7 percentage points). Such market data is interpreted as contraindicative, leading to a decline in EUR/USD and a rise in USD/JPY and GBP/USD pairs. 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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