Thread: Daily Market Analysis from ForexMart

EUR/USD. March 10, 2021 | Consolidation at 1.19

On Wednesday, EUR/USD consolidates at 1.1900 in anticipation of US February inflation data in the evening. The consensus forecast assumes an increase of 0.4 percentage points. up to 1.7%.

Such expectations are quite logical, since the rise in prices for industrial goods and energy resources contributed to an increase in the consumer price index. Fed Chairman Jerome Powell in his recent speeches also pointed to the rise in inflation in the next few months.

If analysts' forecasts come true, the dollar may strengthen somewhat, but high volatility should not be expected, as investors will refrain from opening positions before tomorrow's ECB meeting.

GBP/USD. March 10, 2021 | The pair is in the 1.39 area in anticipation of US inflation data

On Wednesday, the GBP/USD pair is trading with no definite direction in the 1.3900 area. Over the past two weeks, the pound has shown a downward correction, but investors continue to believe in the «bullish» outlook for the asset with a return to the level of 1.40.

This optimism was fueled by news that the UK authorities have decided to ease quarantine measures. Since Monday, for example, schools have started operating in the country. Additional support for the sterling was provided by yesterday's report on retail sales, which showed an indicator growth of 9.5% against expectations of an increase of 7.0%.

Today you should pay attention to the report on consumer inflation for February in the United States. Analysts expect inflation to rise by 0.4%. Such values ​​are clearly not enough for the FRS to somehow change the monetary policy, but they are quite enough to put pressure on the US dollar.

EUR/USD. March 11, 2021 | The dollar is under pressure from the inflation report

On Thursday, the EUR/USD pair began to recover after falling the day before to the level of 1.1830. The current quote for the pair is 1.1965. The euro is growing for the third session in a row amid growing interest in risky assets.

An additional factor strengthening the pair was yesterday's statistics on inflation in the US. The report showed quite strong growth on an annualized basis (+1.7%), but if we consider the indicator of core inflation excluding food and energy prices, the growth remains very small. Such inflationary pressure will not be able to influence the Fed's rate decision, so Treasury yields began to decline, which led to a weakening of the dollar.

An additional negative factor for the American currency was also the report on the state of the budget, which showed an increase in the budget deficit to $ 311 billion from the previous value of $ 163 billion. And, of course, the completion of the discussion of the $ 1.9 trillion fiscal stimulus program is also exerting strong pressure on the dollar exchange rate today. The day before, the bill was approved in Congress and sent for signature to the President, who is expected to sign the law on Friday, March 12.

Today the ECB will meet to decide on interest rates. If the regulator calls for the continuation of the stimulus program, the EUR/USD buyers will have a stronger chance of testing 1.20.

EUR/USD. March 12, 2021 | Euro sank after ECB meeting

The euro slipped somewhat after the ECB's decision to keep the rate at zero. The current quote for the EUR/USD pair is 1.1933. The European regulator managed to surprise the markets by announcing plans to significantly increase the rate of asset repurchases in the next quarter. The reason for this decision was the recent rise in government bond yields and fears about a possible jump in inflation in the coming months.

The ECB also raised its GDP and inflation forecasts for 2020 and 2021. This year, the economy is expected to grow by 4% and inflation by 1.5%. Experts note that until the eurozone economy shows a stable recovery, the euro will continue to lag behind its main foreign exchange competitors.

The US Federal Reserve will hold its meeting next week, during which updated economic forecasts will also be presented. Yesterday, the United States published good data on applications for unemployment benefits (712 thousand against the forecast of 725 thousand).

Today you should pay attention to statistics on producer prices and consumer sentiment from the University of Michigan. We are also monitoring the further fate of the US fiscal assistance package: it is expected that today President Joe Biden will finally sign the corresponding bill.

GBP/USD. March 15, 2021 | The pair fluctuates weakly near the 1.3900 level

«Bears» for the GBP/USD pair failed to gain a foothold below 1.3860 and the pound began to gradually recover at the beginning of a new trading week. The current quotation of the asset is 1.3915.

Prior to that, the pair's decline was driven by disappointing UK GDP data. The indicator decreased by 9.2% (y/y) and 2.9% (m/m). Moreover, manufacturing output fell 2.3% in January.

The economic calendar for today is absolutely empty, so the trading day promises to be calm. It is also worth noting that investors took a neutral position, expecting a reaction to the injection of $ 1.9 trillion in fiscal stimulus into the US economy and the outcome of the two-day Fed meeting. In light of a serious rise in inflationary expectations (the University of Michigan believes that inflation may rise to 3.1%), the American regulator may nevertheless tighten its monetary policy.

Brent. March 16, 2021 | Oil continues to decline

Brent crude oil continues to decline during the trading session on Tuesday, trading just below $68 a barrel. Previously, quotes were growing steadily amid hopes for a faster recovery in global economic growth due to the gradual lifting of quarantine restrictions in many regions of the world. However, investors are still worried about the emergence of new strains of coronavirus in Europe, and Italy has even announced the restoration of a partial lockdown in the country.

Despite the local correction, «black gold» retains the potential for further growth. On the side of buyers is strong statistics from China – the largest consumer of oil. Industrial production jumped 35.1% in January-February compared to the same period last year, according to Monday's data. Analysts had expected a more modest gain of 30.5%.

Market participants even assume that oil prices will be able to reach the level of $80 per barrel in the second quarter, after many quarantine measures are lifted and economic activity is restored. Experts predict that global oil demand will rebound by about 6 million barrels a day from last year, after falling by 8.7 million barrels a day in 2020. For the period 2021-2023 demand is projected to grow at more than 9 million barrels per day – the fastest pace since the 1970s.

EUR/USD. March 17, 2021 | Dollar at 1.19 in anticipation of the results of the Fed meeting

On Wednesday, EUR/USD continues to trade at 1.1900 in anticipation of the results of the US Federal Reserve meeting, which will be announced tonight.

Yesterday's economic statistics put pressure on the dollar. Retail sales in February decreased by 3.0% m/m against the previous growth by 7.6% m/m (revised value). The forecast assumed a decline of only 0.5%. Analysts note that sales have deteriorated amid cold weather in the States this year.

The volume of industrial production in the US in February fell by 2.2% m/m against expectations of growth by 0.4% m/m and the previous rise by 1.1% m/m. This was also the result of an abnormally cold and snowy winter.

Today all traders' attention is focused on the decision of the US Federal Reserve on the rate and further course of monetary policy. The rate is likely to remain at zero, and the main interest is the press conference of the head of the FRS. The tone of J. Powell's comments may become a little more aggressive than before, however, one should not expect signals of a softening of the policy.

The economic calendar for today is practically empty, so trading will be held in a calm manner near the level of 1.19, until the announcement of the results of the Federal Reserve meeting.

GBP/USD. March 17, 2021 | Market participants awaiting the results of the US Federal Reserve meeting

The focus of traders this week is the meetings of the US and UK central banks. The US Federal Reserve will announce the results of its meeting tonight: analysts predict that the regulator will leave the current parameters of monetary policy unchanged, while raising the assessment of economic growth, as well as, possibly, inflation.

Based on the results of the December meeting, the leaders of the FRS predicted that the target inflation rate of 2% would be achieved no earlier than 2023. However, now the regulator may revise its forecasts towards accelerating inflation, given the recent macroeconomic data. And this will undoubtedly be a positive factor for the US dollar.

As for the Bank of England, which will meet on Thursday, economists believe that the Central Bank will continue to take a wait-and-see attitude and will keep its policy unchanged. Despite the fact that the yield on UK government bonds rose sharply amid expectations of a faster economic recovery and higher inflation. Moreover, yesterday the head of the Bank of England Andrew Bailey said that the bank will continue to buy bonds this year, despite the fact that «inflation will remain below the target of 2%.»

The current quote for the GBP/USD pair is 1.3900. The RSI indicator is growing weakly from the neutral zone, which signals further moderate strengthening of the pound sterling during the day, until the announcement of the results of the US Federal Reserve meeting.

EUR/USD. March 18, 2021 | The results of the Fed meeting put pressure on the dollar

On Thursday morning, the euro continues to rise to the 1.20 area. The current quote for the EUR/USD pair is 1.1986. Yesterday there was a meeting of the US Federal Reserve System, as a result of which the American currency significantly weakened, having lost control over the level of 1.19.

As market participants expected, the regulator kept the base rate at the level of 0-0.25% per annum. The Fed also made it clear that it does not intend to raise interest rates throughout 2023, despite the rapid recovery of the American economy.

The central bank also improved its forecast for US GDP: now the regulator predicts economic growth by 6.5% in 2021, not 4.2%. Moreover, inflation is expected to exceed the Fed's 2% target this year at 2.4%.

Today you should pay attention to the macro statistics on the US labor market. Analysts expect that the number of initial claims for unemployment benefits fell by 12 thousand from the previous week, to 700 thousand. If the forecast is confirmed, the US dollar will have an incentive to recover from yesterday's drawdown.

EUR/USD. March 19, 2021 | The dollar is back under the 1.1900 level

On Friday, the dollar returned to the 1.19 level, having recouped most of the losses incurred following the FOMC meeting. The American regulator said that it does not intend to raise interest rates until 2023, however, the recovery of the dollar and the growth of government bond yields indicate that market participants are still guided by an optimistic economic scenario.

The dollar was also supported by an increase in the manufacturing activity index (according to the Philadelphia Fed report), which also underpins the improved economic forecasts of the central bank. The index rose from 23.3 to 51.8 points, reaching a maximum of the last 48 years.

At the same time, the euro is under pressure from the worsening situation with the coronavirus in Europe. Many countries are returning to lockdowns, others are in no hurry to remove restrictions. The head of the European Commission, Ursula von der Leyen, believes that all this is due to a decrease in the rate of vaccination against the background of refusal of the AstraZeneca vaccine due to possible severe side effects.

The economic calendar is empty for today. The current quote for the EUR/USD pair is 1.1880. The RSI indicator weakly declines from the neutral zone, which signals further moderate strengthening of the dollar.

GBP/USD. March 22, 2021 | Sterling moderately grows at the beginning of the week

At the end of last trading week, the pound sterling fell to the 1.3800 area. On Monday, the pair is trying to win back losses, rising to 1.3850.

The latest macroeconomic data from the UK turned out to be rather weak, so the pound is unlikely to strengthen significantly. The pound made some attempts to grow after the announcement of the results of the meeting of the Bank of England last Thursday. The regulator decided to keep the base interest rate at 0.1%, and the volume of redemption of assets from the market – at 895 billion pounds.

The central bank also noted that if the inflation forecast deteriorates, the monetary policy committee is ready to take any necessary additional actions. However, no tightening of monetary policy is expected until there is confidence in achieving a robust 2% inflation target.

Today the macroeconomic calendar is empty. In the coming days, data on business activity, employment, inflation and retail sales in the UK will be released. Experts expect the numbers to strengthen as mass vaccinations boost confidence and economic activity.

EUR/USD. March 22, 2021 | The euro is trying to close above 1.19

The main currency pair is trading slightly above the 1.1900 level on Monday. The euro is trying to regain the losses of the last week, but this is not happening very confidently. The fact is that the US dollar remains quite stable after the comments and decisions of the FRS following the March meeting. Moreover, the yield on US government bonds continues to rise, which provides fundamental support to the greenback.

The rise in bond yields came after the announcement that the Fed had not extended the benefits for second-tier banks introduced last year due to the coronavirus pandemic. The mechanism was introduced to stimulate bank lending; now, according to the Fed, there is no obvious need for it.

The euro, in turn, is under pressure due to the suspension of Covid vaccinations in Europe with the drug company AstraZeneca. Investors fear that against the background of this, the terms of lockdowns in some European countries will be extended, and this is a certain negative for the European currency.

Today the macroeconomic calendar is completely empty. Attention can only be attracted by the speech of the head of the US Federal Reserve, Jerome Powell. However, market participants are unlikely to learn something new, since the head of the regulator has repeatedly commented on the prospects for the Fed's monetary policy.

EUR/USD. March 23, 2021 | The euro continues to decline from the level of 1.19

The euro continues to be under pressure against the dollar, settling below the 1.1900 level. The current quote for the EUR/USD pair is 1.1875. Recently, the main driver of fluctuations in the US dollar has been the movement of the yield on US government bonds: when it grows, the dollar also begins to rally.

An additional important factor supporting the dollar is the optimism about a quick recovery of the American economy, including taking into account additional stimulus.

At the same time, the eurozone is mired in a crisis, which puts significant pressure on the euro rate. The fact is that Europe is lagging behind the United States in terms of vaccination of the population, and an increasing number of countries are again tightening or extending quarantine restrictions. As a result, the economic indicators of the eurozone are showing a decline, and the ECB is forced to remain cautious in all its steps and actions.

This week is scheduled to publish data on business activity in the euro area and the result of the IFO survey in Germany. Analysts predict that new releases could disappoint the markets once again. Today the economic calendar is almost empty, so the pair will continue to decline slightly in anticipation of new drivers.