Analytics, News, and Forecasts for CFD Markets: currency news — 17-03-2021.

Reuters reports that G7 advanced economies are still discussing a proposal to boost International Monetary Fund reserves for pandemic relief, several sources close to the discussion said on Wednesday, dismissing a report that a deal had been reached.

Earlier, Japan’s Kyodo news agency reported they had secured agreement for increased reserves of around $650 billion through a new allocation of the fund’s special drawing rights ahead of a meeting of G7 finance leaders to be hosted by Britain on Friday.

A G7 source said that Friday’s call would deal with the matter but that “work needs to be done”.

FXStreet reports that Credit Suisse discusses copper prospects.

“Copper strength looks to have peaked near-term and with a bearish weekly RSI divergence in place we continue to look for a consolidation/corrective phase to emerge. This though will be seen as a healthy and overdue phase following the impressive rally of the past year.” 

“Post a consolidation we will then look for a resumption of the uptrend back to and then above the current cycle high at $9617. We would then see resistance next at the psychological $10000 resistance level and eventually the key high of 2011 at $10190.”

Reuters reports that spokesman for Prime Minister Boris Johnson said that Britain expects the European Union to stand by its commitment that the bloc will not restrict vaccine exports which are under contract.

Asked for a response to European Commission President Ursula von der Leyen calling on Britain to show willingness to ship vaccines to the bloc, the spokesman referred to a conversation Johnson had with her earlier this year.

“She confirmed then that the focus of their mechanism was on transparency and not intended to restrict exports by companies where they are fulfilling contractual responsibilities,” he told reporters.

CNBC reports that the World Health Organization said that coronavirus vaccination rollouts using the AstraZeneca-Oxford University shot should continue while it carries out a safety review.

The latest guidance from the global public health body comes after a raft of European countries announced that they would suspend use of the shot over concerns that it could be linked to reported cases of blood clots in the region.

On Wednesday, the WHO issued a statement in which it said that “vaccination against COVID-19 will not reduce illness or deaths from other causes.”

It said that while it was routine for countries to signal potential adverse events following immunization, particularly in mass vaccination campaigns, “this does not necessarily mean that the events are linked to vaccination itself.”

Nonetheless, it added, “it is good practice to investigate them. It also shows that the surveillance system works and that effective controls are in place.”

eFXdata reports that TD Research discusses its expectations for the FOMC policy meeting.

"The Fed takes center stage today, likely resulting in more confusion than clarity on the future monetary policy prospects. While there are no policy shifts expected, markets will home in on any shifts in the dots. We expect the median dot will show no tightening through end-23 and the Fed's tone is likely to remain dovish. It's an unsatisfying mix. For markets, though, that's likely to generate more volatility today," TD adds.

Bloomberg reports that France will announce stricter localized measures in an effort to contain the spread of Covid-19 on Thursday, and they may include lockdowns.

“Additional measures will be taken in a certain number of territories,” government spokesman Gabriel Attal told reporters on Wednesday after a cabinet meeting. They will target the economically-important Paris region as well as the north of the country, and could include lockdowns, he said.

But amid a sluggish vaccine roll out officials warned that wasn’t enough, and they turned to localized restrictions in Covid-19 hotspots, shuttering the northern city of Dunkirk last month and the region of Alpes-Maritimes in the south, including Nice, on the weekends.

The new measures that Attal alluded to on Wednesday would enter into force this weekend. He said that the curbs on domestic travel are under discussion, but a decision has yet to be made.

FXStreet reports that Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, discusses gold prospects.

“The market is bouncing just ahead of the $1670 June low and the 1671 2019-2021 uptrend. This is currently holding the downside. Initial resistance is offered by the $1760/65 band, which is the May high and November low and a close above here is needed in order to alleviate downside pressure and signal recovery to the 200-day ma at $1861.10. Above the 200-day ma at $1861.10 lies 1906, the 21st December high, and the top of the channel at $1918. This guards the November and September highs at $1965.84/$1973.8 and the 78.6% retracement at 2006.”

According to the report from Statistics Canada, the Consumer Price Index (CPI) rose at a faster pace year over year in February (+1.1%) than in January (+1.0%). Economists had expected a 1.3% increase.

The rise in gasoline prices (+5.0%) supported consumer price growth in February. Excluding gasoline, the CPI rose 1.0% in February—down from a 1.3% increase in January.

On a seasonally adjusted monthly basis, the CPI rose 0.1% in February.

Prices for consumer goods (+1.0%) rose at a faster year-over-year pace in February compared with January (+0.1%), mostly because of higher gasoline prices. The price increase for services slowed year over year in February (+1.2%) compared with January (+1.9%). Lower clothing prices (-7.1%) largely contributed to the year-over-year price decline for semi-durable goods (-3.5%) in February.

Gasoline prices rose for the third consecutive month, up 6.5% in February compared with January (+6.1%), and this supported growth in consumer prices in February. The price increase comes amid a gradual recovery in global demand for gasoline, crude oil supply cuts in major oil-producing countries and weather-related shutdowns in the southern United States.

On a year-over-year basis, gasoline prices were 5.0% higher, the first yearly price increase since February 2020.

According to the report from Census Bureau, privately-owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,682,000. This is 10.8 percent (±1.0 percent) below the revised January rate of 1,886,000, but is 17.0 percent (±1.4 percent) above the February 2020 rate of 1,438,000. Single-family authorizations in February were at a rate of 1,143,000; this is 10.0 percent (±0.8 percent) below the revised January figure of 1,270,000. Authorizations of units in buildings with five units or more were at a rate of 495,000 in February.

Privately-owned housing starts in February were at a seasonally adjusted annual rate of 1,421,000. This is 10.3 percent (±10.5 percent) below the revised January estimate of 1,584,000 and is 9.3 percent (±9.4 percent) below the February 2020 rate of 1,567,000. Single family housing starts in February were at a rate of 1,040,000; this is 8.5 percent (±9.3 percent)* below the revised January figure of 1,136,000. The February rate for units in buildings with five units or more was 372,000.

Reuters reports that the German government’s council of economic advisers said they expected Europe’s largest economy to shrink by roughly 2% in the first quarter of this year due to lockdown measures to contain the COVID-19 pandemic.

The council cut its full-year 2021 gross domestic product growth forecast to 3.1% from 3.7% previously. It expects the economy to reach its pre-crisis level at the turn of the year 2021/22 and to grow by 4% next year.

During today's European trading, the US dollar rose slightly as traders await the conclusion of the US Federal Reserve's two-day meeting, which will present recommendations for future monetary policy. Investors will be closely watching the Fed's comments on bond yields. Government bond yields around the world jumped on expectations that economic growth and inflation could lead to a faster-than-expected normalization of monetary policy.​

The yen fell against the dollar, and is trading near a nine-month low, ahead of the Bank of Japan's two-day meeting, which ends on Friday.

The pound rose against the dollar ahead of the Bank of England's meeting on Thursday. Analysts predict that the central bank will keep its benchmark interest rate at a historic low of 0.1% and will not change the terms of the bond purchase program.

The euro has fallen slightly as concerns grow about further restrictions in Europe and delays in vaccination.

The ICE Dollar index, which shows the value of the US dollar against six major world currencies, rose by 0.11%.

FXStreet reports that Credit Suisse discusses EUR/GBP prospects.

“The rebound in EUR/GBP proved to be brief to say the least and the early gains seen yesterday have been aggressively reversed for a close back below the 13-day exponential average, turning the spotlight back on key Fibonacci supports, seen starting at 0.8549 and stretching down to 0.8520 – the 38.2% retracement of the entire 2015/2020 bull trend.”

“With an existing top in place, we continue to look for an eventual break below here in due course to see a move to the ‘measured top objective’ at 0.8430 and eventually we think the key lows of 2019 and 2020 at 0.8281/39.”

Reuters reports that Greece got 17 billion euros of demand for its new 30-year bond issue, its first such sale in over a decade.

Pricing was set in a range of 150-155 basis points over mid-swaps, the lead manager said.

Greece last issued a 30-year bond in 2008, a year before the start of its worst debt crisis in decades. After regaining market access in 2017, it has gradually been issuing longer-dated bonds, venturing out to a 15-year maturity last January.

Greece plans to borrow up to 12 billion euros this year and has already raised 5.5 billion euros with the reopening of a 30-year bond through a private placement and a new 10-year bond issue in January.

FXStreet reports that Credit Suisse discusses USD/CNY prospects.

“USD/CNY maintains a small base and has seen the expected test of 6.5561. However, with MACD momentum also pointing at further upside, further strength is likely in due course. A direct break above 6.5561 would warn of further upside with resistance seen thereafter at the 23.6% retracement of the 2020/2021 fall at 6.6016. Later in the year, we eventually expect a turn back lower and an eventual sustained break below 6.4446/6.4236 would open up the next key support at 6.3871.”

According to the report from Eurostat, in January 2021 compared with December 2020, seasonally adjusted production in the construction sector increased by 0.8% in the euro area and by 0.9% in the EU. In December 2020, production in construction fell by 1.5% in the euro area and by 1.3% in the EU.

In January 2021 compared with January 2020, production in construction decreased by 1.9% in the euro area and by 1.8% in the EU.

In the euro area in January 2021, compared with December 2020, building construction increased by 1.3% and civil engineering by 0.1%. In the EU, building construction increased by 1.1% and civil engineering by 0.8%.

In the euro area in January 2021, compared with January 2020, civil engineering decreased by 7.4% and building construction by 0.4%. In the EU civil engineering decreased by 6.5% and building construction by 0.7%.

According to the report from Eurostat, the euro area annual inflation rate was 0.9% in February 2021, stable compared to January. A year earlier, the rate was 1.2%. European Union annual inflation was 1.3% in February 2021, up from 1.2% in January. A year earlier, the rate was 1.6%.

The lowest annual rates were registered in Greece (-1.9%), Slovenia (-1.1%) and Cyprus (-0.9%). The highest annual rates were recorded in Poland (3.6%), Hungary (3.3%) and Romania (2.5%). Compared with January, annual inflation fell in ten Member States, remained stable in three and rose in fourteen.

In February, the highest contribution to the annual euro area inflation rate came from services (+0.55 percentage points, pp), followed by food, alcohol & tobacco (+0.29 pp), non-energy industrial goods (+0.26 pp) and energy (-0.15 pp).

FXStreet reports that economists at MUFG Bank believe Powell has a really tough job to convince the markets of the sustainability of the Fed’s ultra dovish stance. 

“The DOTs plot will be one key area of focus and at the margin we see the median DOT for the timing of the first rate increase remaining in 2024 – four FOMC members would need to bring forward their view to 2023 in order to see the median shift to 2023. That’s certainly feasible and wouldn’t be a huge surprise given the scale of increase in macro estimates we are likely to see following the $1.9trn fiscal stimulus that’s about to start hitting the economy. 

“While we may well get to a point this year when the Fed deems it necessary to signal a slowing of the current $20 B per month pace of QE, tonight is certainly not the time for that.”

“We maintain that Powell has a difficult job to convince the markets on the maintenance of the dovish stance. Even with low inflation forecasts; no shift in the DOT plot and strong dovish words, we see limited scope for yields to decline much over the short-term and see risks for the US dollar still skewed to the upside for now.”

Reuters reports that the International Energy Agency (IEA) said that oil prices are unlikely to mount a dramatic and sustained surge despite vaccines expected to boost demand later this year.

"Oil's sharp rally to near $70 a barrel has spurred talk of a new supercycle and a looming supply shortfall. Our data and analysis suggest otherwise," the IEA said in its monthly report.

"For a start, oil inventories still look ample compared with historical levels despite a steady decline ... On top of the stock cushion, a hefty amount of spare production capacity has built up as a result of OPEC+ supply curbs," it said.

"The prospect of stronger demand and continued OPEC+ production restraint point to a sharp decline in inventories during the second half of the year," the IEA said.

"For now, however, there is more than enough oil in tanks and under the ground to keep global oil markets adequately supplied."

CNBC reports that former Australian Prime Minister Kevin Rudd said that the meeting between U.S. and Chinese officials this week in Alaska is unlikely to produce any major breakthroughs.

U.S. Secretary of State Antony Blinken and national security advisor Jake Sullivan will hold high-level, in-person talks on Thursday with China’s Yang Jiechi, a member of the Communist Party’s top decision-making body, and Wang Yi, the foreign minister. It will be the Biden administration’s first high-level meeting with Chinese officials.

“It’s more likely to be a dialogue about dialogue rather than substantive problem-solving,” said Rudd.

The two countries are searching for a new strategic narrative to govern their bilateral relationship, which structurally has become “more problematic” due to the shifting balance of power between Washington and Beijing, according to Rudd. He explained that China’s rising influence has made the two superpowers fierce rivals in areas of trade, investment, technology, capital markets, influence as well as ideology.

Reuters reports that index, compiled by the Z/Yen Group, a London-based think tank, and the China Development Institute, showed that New York kept the top spot in the latest Global Financial Centres Index (GFCI), with London clinging on to second place in the face of competition from Shanghai and other Asian centres.

Based on 65,507 assessments of financial centres provided by 10,774 respondents to the GFCI online questionnaire, New York held on to the top stop with 764 points, while London dropped 23 points to 743, just one point ahead of Shanghai.

The next five spots were filled by Asian financial centres, with two European centres making up the rear in the top 10.

Asian financial centres make up six of the top 10, with three from Europe, including Frankfurt and Zurich.

FXStreet reports that economists at Westpac discusses AUD/NZD prospects.

“Forecast returns to New Zealand farmers have been revised higher after the recent surge in dairy prices at auction. Overall NZ’s terms of trade continues to trend firmly higher. But prices and volumes of Australia’s key commodity exports have been very robust through the pandemic. Indeed Australia has recorded trade surpluses for >3 years and is running current account surpluses in contrast to ongoing deficits in NZ. The relative monetary policy ‘vibe’ has favoured the kiwi since markets stopped pricing a negative cash rate in Nov 2020. OIS markets now price a sizeable risk of a rate hike this year. However, we expect such expectations to be disappointed, with the cash rate on hold through 2021 and also 2022. We look for AUD/NZD to find support in the mid-high 1.06s, with multi-week scope for another run at 1.10.”

During today's Asian trading, the US dollar has consolidated against the euro and rose against the yen in anticipation of the outcome of the meeting of the Federal reserve system (Fed).

The Fed will probably note an improvement in the outlook for the U.S. economy, but emphasize that it is too early to change the Central Bank's plans in relation to the base interest rate, and volume of redemption of bonds.

Fed Chairman Jerome Powell has repeatedly said in recent months that he would like to see "substantial further progress" in the economic recovery before the Fed begins to reduce the volume of bond purchases, currently $ 120 billion a month.

The promotion of COVID-19 vaccination, as well as the adoption of a new $1.9 trillion economic stimulus package, have improved the outlook for the US economy, but the Fed is unlikely to tighten the current ultra-soft policy until these forecasts are justified.

At the same time, investors are concerned about the slow pace of coronavirus vaccination in the EU and the impact on the region's economic recovery. A number of European countries, including Germany, France, Spain and Italy, have suspended the use of the COVID-19 vaccine manufactured by AstraZeneca. This step was taken by the authorities in connection with reports that some people after vaccination with this drug formed blood clots.

The ICE Dollar index, which shows the value of the US dollar against six major world currencies, rose by 0.05%.

According to the report from the European Automobile Manufacturers' Association (ACEA), in February 2021, new passenger car registrations in the European Union dropped by 19.3%, as COVID containment measures and uncertainty continue to weigh heavily on demand. With 771,486 units registered across the EU region, this marked the lowest February total on record since 2013. All four major EU markets recorded losses last month. Italy posted the smallest drop (-12.3%), while the other markets faced stronger declines: Germany (-19.0%), France (-20.9%) and Spain (-38.4%).

From January to February 2021, total registrations of new cars in the European Union were 21.7% lower than during the same period in 2020. So far this year, demand fell in each of the major markets. Spain was the hardest hit, with sales almost halved (-44.6%) compared to last year, followed by Germany (-25.1%), France (-14.2%) and Italy (-13.1%).

eFXdata reports that Barclays Research discusses its expectations for FOMC policy meeting.

"We expect the Fed to rein in policy rate expectations in March, with the median dots still showing no lift-off through 2023, despite an upgraded outlook. Fiscal policy is likely to have only short-term effects on activity, while inflation expectations and underlying inflation remain below mandate-consistent levels. We think the Fed is likely to see the economy as in a similar fundamental position at the end of 2023 as it did last December...We still expect the median member to forecast no hikes through the Fed’s forecast horizon," Barclays adds.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2049 (551)

$1.2019 (577)

$1.1995 (1133)

Price at time of writing this review: $1.1906

Support levels (open interest**, contracts):

$1.1858 (2224)

$1.1832 (4960)

$1.1801 (2940)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date April, 9 is 57229 contracts (according to data from March, 16) with the maximum number of contracts with strike price $1,1900 (4960);

GBP/USD

$1.4041 (523)

$1.4015 (824)

$1.3947 (675)

Price at time of writing this review: $1.3909

Support levels (open interest**, contracts):

$1.3829 (290)

$1.3785 (578)

$1.3757 (1840)

Comments:

- Overall open interest on the CALL options with the expiration date April, 9 is 8479 contracts, with the maximum number of contracts with strike price $1,4100 (1277);

- Overall open interest on the PUT options with the expiration date April, 9 is 19663 contracts, with the maximum number of contracts with strike price $1,3200 (5598);

- The ratio of PUT/CALL was 2.32 versus 2.28 from the previous trading day according to data from March, 16

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

RTTNews reports that S&P Global Ratings affirmed the sovereign ratings of the U.S. at 'AA+' with 'stable' outlook.

S&P maintained the ratings citing its strong institutions, diversified and resilient economy, coupled with monetary policy flexibility, and unique status as the issuer of the world's leading reserve currency.

However, S&P observed the ratings were constrained by high general government debt and fiscal deficits, both of which worsened last year following the economic shock caused by the pandemic.

Despite large projected fiscal deficits in the near term, the agency expects the government to introduce countervailing measures to begin addressing longer-term fiscal challenges.

S&P sees rapid economic growth this year and next as the pandemic recedes and the economy benefits from unprecedented fiscal and monetary stimulus.