Forex-novosti i prognoze od 16-04-2021

• Sees 6.5% GDP growth this year
• Sees 2.5% inflation this year
• Unemployment will drop further
• All the fundamentals are in place for good, strong fundamental growth
• We still need to make up for lost ground, we still have a long way to go
• We're still down 7-8 million jobs from a year ago
• There's no reason to start pulling the plug on stimulus
• Temporary surge in inflation will not last, bottlenecks will go away
• We're happy to let inflation rise above 2%, so long as inflation is anchored
• I don't think anyone would be comfortable if inflation got to 3% or above and stayed there a while
• Dot plot is problem right now; we shouldn't be doing calendar-based forecasts
• Markets are getting ahead of themselves in terms of expecting rate hikes

A report from the University of Michigan revealed on Friday the preliminary reading for the Reuters/Michigan index of consumer sentiment increased 1.9 percent m-o-m to 86.5 in early April. This was the highest reading since March 2020.

Economists had expected the index would increase to 89.6 this month from March’s final reading of 84.9.

According to the report, the index of current U.S. economic conditions surged 4.5 percent m-o-m to 97.2 in April from 93.0 in the previous month. Meanwhile, the index of consumer expectations remained unchanged m-o-m at 79.7.

“Consumers in early April reported surging economic growth and strong job gains due to record stimulus spending, low-interest rates, and the positive impact of vaccinations,” noted Surveys of Consumers chief economist, Richard Curtin. “The strength in current economic conditions reflects much larger than usual stimulus payments during the past year, and much larger than usual economic gains due to comparisons with last year's shutdowns. Other factors suppressed the pace of expected gains, including persistent concerns with vaccine safety as well as a surge in year-ahead inflation expectations to 3.7%, the highest level in nearly a decade,” he added.

Statistics Canada reported on Friday the wholesale sales fell 0.7 percent m-o-m to CAD68.76 billion in February, following an unrevised 4.0 percent m-o-m advance in January. This marked the second decline in wholesale sales in the last three months. Despite the drop, sales in February were the second-highest on record for the sector.

Economists had forecast a 0.4 percent m-o-m drop for February.

According to the report, sales went down in four of the seven subsectors, led by building material and supplies (-6.1 percent m-o-m), and motor vehicle and motor vehicle parts and accessories (-2.5 percent m-o-m).

Excluding motor vehicle and motor vehicle parts and accessories subsector, wholesale sales decreased 0.3 percent m-o-m.

In y-o-y terms, wholesale sales rose 6.5 percent in February.

Meanwhile, wholesale inventories jumped 1.1 m-o-m in February to CAD92.24 billion, recording their third monthly gain in a row, which was the largest one since June 2019. Inventories increased in five of the seven wholesale subsectors, with the machinery, equipment and supplies (+2.4 percent m-o-m) and the personal and household goods (+1.9 percent m-o-m) subsectors registering the largest advances.

In y-o-y terms, wholesale inventories increased 1.1 percent in February.

The inventory-to-sales ratio rose to 1.34 in February from 1.32 in January.

U.S. stock-index futures rose slightly on Friday after S&P 500 and Dow closed at record highs in the previous session, as solid Q1 corporate earnings and increased recovery expectations continued to support the U.S. equity market.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Cisco (CSCO) upgraded to Outperform from Peer Perform at Wolfe Research; target $63

The Commerce Department reported on Friday the housing starts surged by 19.4 percent m-o-m in March to a seasonally adjusted annual pace of 1.739 million (the highest level since June 2006), while building permits rose by 2.7 percent m-o-m to a seasonally adjusted annual rate of 1.766.

Economists had forecast housing starts increasing to a pace of 1.613 million units last month and building permits rising to a pace of 1.750 million units.

Data for February was revised to show homebuilding growing to a pace of 1.457 million units, instead of increasing at a rate of 1.421 million units as previously reported.

According to the report, permits for single-family homes, the largest segment of the market, rose 4.6 percent m-o-m to a rate of 1.199 million units in March, while approvals for the multi-family homes segment decreased 1.2 percent m-o-m to a 567,000 unit-rate.

In the meantime, groundbreaking on single-family homes climbed 15.3 percent m-o-m to a rate of 1.238 million units in March, while housing starts for the multi-family surged 30.0 percent m-o-m at a 477,000 -unit pace.

EUR rose against most of its major rivals in the European session on Friday as risk appetite increased as strong U.S. and Chinese economic data bolstered expectations of a fast global recovery.

The National Bureau of Statistics (NBS) reported that China's GDP expanded 18.3% y/y in the first quarter of 2021, accelerating sharply from a 6.5% y/y growth in the fourth quarter of 2020. This was the strongest pace of expansion since the series began in 1992, but was shy of economists' estimates, suggesting a 19.0% y/y climb. 

The Chinese impressive Q1 data followed the stronger-than-expected retail sales and jobs figures from the U.S., boosting expectations for a sharp global economic recovery.

Market participants also received final March inflation data, which was in line with the initial estimate and economists' forecast of 1.3%, and well below the European Central Bank's (ECB) "just below 2%"-target.

FXStreet reports that economists at Danske Bank believe that the ongoing vaccine roll-out, reopening of economies and growing inflationary pressure has brightened the outlook for oil prices.

“Vaccines roll out, reopening of economies, strong support from monetary and fiscal policy and a relatively weak dollar all creates a sound back drop for global oil demand.”

“We have revised our oil price forecasts higher and now expect Brent to average $65/bbl in Q2 (from $55/bbl), $70bbl in Q3 and Q4 (from $60/bbl (and $72.5bbl in 2022 (from $65/bbl)."

Morgan Stanley (MS) reported Q1 FY 2021 earnings of $2.19 per share (versus $1.01 per share in Q1 FY 2020), beating analysts’ consensus estimate of $1.58 per share.

The company’s quarterly revenues amounted to $15.719 bln (+65.7% y/y), beating analysts’ consensus estimate of $13.484 bln.

MS rose to $81.00 (+0.22%) in pre-market trading.

Iris Pang, ING's Chief Economist for Greater China, notes that China's high GDP growth in 1Q21 was a mix of base effects and genuine recovery. Without such base effects, China's GDP growth will appear more moderate over the rest of the year.

"China's GDP growth was 18.3%YoY in 1Q21, our estimate was 12%YoY, which was the lowest estimate among economists in the survey, the highest estimate was 22%. The apparent strength of these figures relies on powerful base effects from last year's first quarter (-6.8%YoY in 1Q20). A slight difference in GDP levels estimates results in very different %YoY outcomes, so it is not appropriate to get overwhelmed by what looks like a high growth data release."

"There are several points we would like to highlight for the rest of 2021 on the Chinese economy."

"1. The high GDP growth in 1Q21 will not persist over the rest of the year. Most quarters should experience moderate growth because without base effects to swell the comparison, “super-high” growth will be very hard to repeat. Quarter on quarter growth rates should continue to stabilise between 1% to 2%."

"2. China-US relations will be critical for China's economic growth, mostly in technology development. It is likely that the US will continue to put more pressure on China on this topic."

"3. Concern about chip shortages is becoming a practical issue for businesses, from investment to production to exports and domestic sales. How long this bottleneck will take to clear is unclear."

"4. We don't think there will be any tightening of monetary policy. The central government has restarted deleveraging reform focusing on the weak cash flow of real estate property developers. So, there is room for a relaxation of monetary policy."

"Our GDP forecasts are 5.5%YoY, 5.0%%YoY and 5.5%YoY for 2Q21, 3Q21 and 4Q21 respectively. And therefore, the full-year forecast has changed to 8.6% from 7.0%."

FXStreet reports that the Credit Suisse analyst team notes that GBP/USD risk looks to be already shifting lower again and below 1.3750 would warn of a retest of key support from the March low at 1.3670/63.

“Support remains seen at 1.3750 initially, below which can see the base negated to clear the way for a fall back to 1.3695, then more likely a retest of the March low at 1.3670/63.” 

“Beneath the March low at 1.3670/63 would see the broader risk turn lower again with support then seen next at the 38.2% retracement of the rally from last September at 1.3641, then 1.3567. Whilst we would expect a hold here at first, below in due course can see a move back to the ‘neckline’ to the long-term base, potentially 1.3458/52.” 

“Above 1.3809 is needed to rekindle thoughts of a base for a test of the 55-day average, price resistance and potential downtrend at 1.3823/46, with fresh sellers expected here."

FXStreet reports that according to FX Strategists at UOB Group, USD/CNH risks a further decline in the next weeks.

24-hour view: “Our expectation for USD to ‘test 6.5180 first before stabilizing’ did not materialize as it traded between 6.5228 and 6.5440 before closing little changed at 6.5270 (-0.07%). The current movement is viewed as part of a consolidation and USD is likely to trade between 6.5200 and 6.5400 for today.”

Next 1-3 weeks: “The rapid improvement in downward momentum is expected to lead to further USD weakness even though 6.5000 may not come into the picture so soon. Overall, the current downward pressure in USD is deemed intact as long as it does not move above 6.5530 (‘strong resistance’ level was at 6.5630 yesterday).”

FXStreet reports that USD/CHF continues to stabilize above key retracement support at 0.9200 and analysts at Credit Suisse look for a break above 0.9260 to confirm an intraday base.

“Long positioning has likely been cleared out after the recent intraday move below the 0.9200 level, and trend following indicators such as moving averages maintain a bullish ‘golden cross’, with weekly MACD staying outright bullish.”

“We stay biased towards a reversal higher from here, with resistance seen initially at 0.9260/69, above which would confirm an important low for an eventual retest of 0.9465/73 highs. 

“A clear, conclusive and closing break beneath the recent lows and the 38.2% retracement of the 2021 surge at 0.9200 would instead trigger a top and suggest a much deeper move lower."

Alcoa (AA) reported Q1 FY 2021 earnings of $0.79 per share (versus -$0.23 per share in Q1 FY 2020), beating analysts’ consensus estimate of $0.47 per share.

The company’s quarterly revenues amounted to $2.870 bln (+20.5% y/y), beating analysts’ consensus estimate of $2.647 bln.

AA rose to $33.90 (+3.23%) in pre-market trading.

FXStreet notes that the UK virus concerns and a bounce in the EUR recently brought EUR/GBP to the highest level since early March. Despite this recent increase in EUR/GBP, economists at Danske Bank remain bullish on GBP, as they continue to be more positive on the UK compared to EU.

“EUR/GBP has increased close to 0.87 since our last update after it briefly went below 0.85. We think this is a bump in the road and remain bullish on GBP, as we are still more upbeat on the UK than on the euro area.”

“We still forecast EUR/GBP will trade at 0.83 in 12M.”

FXStreet reports that economists at Credit Suisse discusses S&P 500 Index prospects.

“We continue to see a range of ‘red flags’ to suggest the market is tactically overstretched, with the market above what we see as its “typical” extreme - 15% above its 200-day average. Importantly, Volume/OnBalanceVolume is still not confirming the new highs and daily RSI momentum is now also not confirming the new highs and we maintain our view we are getting close to a peak to this phase for the emergence of a consolidation/corrective phase.” 

“We still look for further strength yet though to 4175/79 and ideally our 4200 Q2 objective. Our bias remains to look for more concerted signs of a top here. Should strength directly extend, we would see resistance next at 4225/30.” 

According to the report from Eurostat, the first estimate for euro area exports of goods to the rest of the world in February 2021 was €178.6 billion, a decrease of 5.5% compared with February 2020 (€188.9 bn). Imports from the rest of the world stood at €161.0 bn, a fall of 2.7% compared with February 2020 (€165.4 bn). As a result, the euro area recorded a €17.7 bn surplus in trade in goods with the rest of the world in February 2021, compared with +€23.4 bn in February 2020. Intra-euro area trade rose to €164.8 bn in February 2021, up by 1.7% compared with February 2020.

In January to February 2021, euro area exports of goods to the rest of the world fell to €346.2 bn (a decrease of 7.2% compared with January-February 2020), and imports fell to €317.5 bn (a decrease of 8.7% compared with January-February 2020). As a result the euro area recorded a surplus of €28.7 bn, compared with +€25.0 bn in January-February 2020. Intra-euro area trade fell to €319.2 bn in January-February 2021, down by 2.7% compared with January-February 2020.

According to the report from Eurostat, the euro area annual inflation rate was 1.3% in March 2021, up from 0.9% in February. A year earlier, the rate was 0.7%. European Union annual inflation was 1.7% in March 2021, up from 1.3% in February. A year earlier, the rate was 1.2%.

The lowest annual rates were registered in Greece (-2.0%), Portugal, Malta, Ireland and Slovenia (all 0.1%). The highest annual rates were recorded in Poland (4.4%), Hungary (3.9%), Romania and Luxembourg (both 2.5%).

Compared with February, annual inflation fell in three Member States, remained stable in three and rose in twentyone. 

In March, the highest contribution to the annual euro area inflation rate came from services (+0.57 percentage points, pp), followed by energy (+0.43 pp), food, alcohol & tobacco (+0.24 pp) and non-energy industrial goods (+0.09 pp).

RTTNews reports that data from the statistical office Istat showed that Italy's trade surplus decreased in February.

The trade surplus fell to EUR 4.754 billion in February from EUR 5.975 billion in the same period last year. In January, the trade surplus was EUR 1.584 billion.

Exports declined 4.4 percent year-on-year in February, following a 8.5 percent fall in January.

On an annual basis, imports fell 1.6 percent in February, following an 11.6 percent decrease in the preceding month.

On a monthly basis, exports increased 0.3 percent and imports rose 1.4 percent in February.

FXStreet reports that economist at UOB Group Lee Sue Ann assesses the latest RBNZ event.

“At its April meeting, the Reserve Bank of New Zealand (RBNZ) decided to maintain the Official Cash Rate (OCR) at 0.25%, and the Large Scale Asset Purchase (LSAP) and Funding for Lending (FLP) programmes unchanged.”

“The accompanying media release was relatively short, with the RBNZ stating that it agreed to maintain its current stimulatory monetary settings until it is confident that consumer price inflation will be sustained at the 2% per annum target midpoint, and that employment is at or above its maximum sustainable level.”

“As for monetary policy, we think that policymakers at the RBNZ need to be ready to come out swinging if underlying momentum threatens to turn. For now, we think that negative interest rates are a risk but an increasingly low one. Our call remains for the OCR to be unchanged at 0.25%. More likely, further quantitative easing will be implemented. We see the RBNZ boosting the Funding for Lending program and its asset purchases. It is also likely to get tougher on the macro-prudential front given the hot property market and concerns around high-risk lending.”

According to the report from European Automobile Manufacturers' Association (ACEA), in March 2021, registrations of new passenger cars in the European Union increased by 87.3%. 1,062,446 new cars were sold in the EU last month, compared to 567,253 during the same month in 2020.

In March 2021, registrations of new passenger cars in the European Union increased by 87.3%, the result of last year’s exceptionally low base of comparison caused by the strict COVID-19 restrictions introduced in most markets in March 2020. 1,062,446 new cars were sold in the EU last month, compared to 567,253 during the same month in 2020. Triple-digit gains were posted by three of the four largest EU markets: Italy saw the biggest increase (+497.2%), followed by France (+191.7%) and Spain (+128.0%). The German market also showed strong gains, with sales up 35.9% in March.

During the first quarter of 2021, EU demand for new cars grew by 3.2% to reach 2.6 million units registered in total. Despite steep declines during the first two months of the year (-24.0% in January and -19.3% in February), March’s strong results managed to offset the negative trend. Looking at the major EU markets, last month’s gains brought the cumulative performances of Italy and France into positive territory (up 28.7% and 21.1% respectively). On the other hand, both Spain (-14.9%) and Germany (-6.4%) continued to post declines so far in 2021, although significantly less dramatic than in the preceding months.

Reuters reports that according to Refinitiv Lipper, global equity funds lured massive inflows in the week ended April 14, on optimism over a strong second quarter earnings, and a decline in U.S. yields due to tempered expectations about a rise in inflation levels.

Investments in global equity funds rose to $16.4 billion this week, the biggest in three weeks, while bond funds also had inflows of about $16 billion.

On the other hand, investors ditched safer money market funds, which faced outflows of $50 billion, the biggest since mid-December last year.

The decline in yields bolstered growth sectors such as technology, which attracted an inflow of $2.1 billion, the biggest in four weeks.

Hopes of higher second-quarter earnings also boosted equity inflows in the week.

Analysts expect profits for S&P 500 firms to show a 25% jump from a year earlier, according to Refinitiv IBES data, which would be the strongest performance for the quarter since 2018.

However, inflows into Asian equities were the lowest compared to other regions, due to a resurgence of COVID-19 cases in India, Philippines, Thailand and South Korea.

During today's Asian trading, the US dollar strengthened against most currencies. Strong statistical data on the US economy, published yesterday, supported the risk appetite in global markets. This factor, as well as a sharp decline in US treasury bond yields, put pressure on the US currency.

The ten-year US Treasuries interest rate fell to 1.531% on Thursday, down from 1.637% at the close of previous trading. The drop was the most significant since the beginning of November. On Friday, the yield on these securities rose slightly to 1.584%.

As the US Department of Labor reported yesterday, the number of new applications for unemployment benefits in the country last week decreased by 193 thousand, to 576 thousand, which is the lowest since March 2020, when the COVID-19 pandemic began.

U.S. retail sales jumped 9.8% in March, the fastest pace since May last year, according to data from the Department of Commerce.

In addition to increasing risk appetite amid signals of a rapid recovery in the US economy, the continued commitment of the Federal Reserve (Fed) to maintain ultra-loose monetary policy remains a deterrent for the dollar.

The ICE index, which tracks the dollar's performance against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), rose 0.07%.

FXStreet reports that economists at Danske Bank look for a higher USD/CNY over the next 6-12 months.

“We see US recovery strongly and Chinese growth moderating this year. It suggests USD/CNY has turned the corner and we look for a higher USD/CNY over the next 6-12 months. Our forecast is unchanged at 6.55 in 3M and 6.70 in 12M.

“We look for EUR/CNY to decline from 7.82 to 7.71 in 12M. It compares with the forward market pricing 8.11 in 12M”.

“The main risk is a weaker USD if inflation takes hold with a Fed that is keeping an accommodative stance. It would push USD/CNY lower.”

According to the report from the Federal Statistical Office (FSO), the Producer and Import Price Index increased in March 2021 by 0.6% compared with the previous month, reaching 100.8 points (December 2020 = 100). 

In particular, petroleum products, basic metals and semi-finished metal products as well as petroleum and natural gas saw higher prices. 

Compared with March 2020, the price level of the whole range of domestic and imported products fell by 0.2%. 

In particular, higher prices for petroleum products were responsible for the increase in the producer price index compared with the previous month. Scrap, basic metals, semi-finished metal products and meat also became more expensive.

The import price index registered higher prices compared with February 2021, particularly for petroleum products, petroleum and natural gas as well as basic metals and semi-finished metal products. The same applies for food products, leather and related products, other transport equipment, motor vehicles and motor vehicle parts. Computers became cheaper.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2091 (1376)

$1.2061 (3548)

$1.2037 (1725)

Price at time of writing this review: $1.1960

Support levels (open interest**, contracts):

$1.1902 (546)

$1.1869 (1758)

$1.1831 (1284)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date May, 7 is 50742 contracts (according to data from April, 15) with the maximum number of contracts with strike price $1,2000 (3548);

GBP/USD

$1.3916 (930)

$1.3888 (501)

$1.3865 (352)

Price at time of writing this review: $1.3741

Support levels (open interest**, contracts):

$1.3703 (360)

$1.3645 (1899)

$1.3610 (971)

Comments:

- Overall open interest on the CALL options with the expiration date May, 7 is 13072 contracts, with the maximum number of contracts with strike price $1,4200 (3728);

- Overall open interest on the PUT options with the expiration date May, 7 is 16680 contracts, with the maximum number of contracts with strike price $1,3700 (1899);

- The ratio of PUT/CALL was 1.28 versus 1.24 from the previous trading day according to data from April, 15

* - 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.

Bloomberg reports that Goldman Sachs Group Inc. brought forward its forecast for peak oil demand in the transportation sector by one year to 2026, if not sooner, largely due to the accelerating adoption of electric vehicles. Overall crude consumption will keep expanding this decade due to jet fuel and petrochemicals, but growth will be at an “anemic” pace past 2025.

Goldman is the latest to reevaluate what the end of demand growth will look like for oil. 

“Government policies driving higher efficiency gains and lower emissions have had the strongest bearing on road transport demand,” Goldman analysts including Nikhil Bhandari and Damien Courvalin said in a report. “Petrochemicals will become the new baseload for oil demand, driven by economic growth and rising consumption, especially in emerging markets.”

Avoiding peak oil this decade largely comes as economic growth continues in emerging markets, while for developed markets, Goldman sees overall oil demand never returning to 2019 levels. The decrease in road transport demand, which accounts for 43% of overall oil consumption, is also being exacerbated by a shift toward permanent work-from-home behaviors in the wake of the pandemic, the report said.

Tightening emission targets in the U.S. and Europe are spurring the outlook for rising electric vehicle penetration, which if adopted at an even faster pace, could drive road transport demand to peak one year earlier than the bank’s base-case scenario. Meanwhile, significantly higher oil prices could also bring forward the peak for overall oil demand, the bank said.

Reuters reports that China's economic recovery quickened sharply in the first quarter from last year's deep coronavirus slump, propelled by stronger demand at home and abroad and continued government support for smaller firms.

Gross domestic product (GDP) jumped 18.3% in the first quarter from a year earlier, official data showed on Friday. While that undershot the 19% forecast by economists in a Reuters poll, it was the fastest growth since quarterly records began in 1992 and up from 6.5% in the fourth quarter last year.

Aided by strict virus containment measures and emergency relief for businesses, the economy has recovered from a steep 6.8% slump in the first three months of 2020, when an outbreak of COVID-19 in the central city of Wuhan rapidly became a crippling pandemic that has killed about 3 million worldwide.

China's rebound has been led by exports as factories raced to fill overseas orders and more recently a steady pickup in consumption as shoppers returned to restaurants, malls and car dealerships.

Retail sales increased 34.2% year-on-year in March, beating a 28.0% gain expected by analysts and stronger than the 33.8% jump seen in the first two months of the year.

Factory output grew 14.1% year-on-year in March, slowing from a 35.1% surge in the January-February period and lagging a forecast 17.2% rise.