Daily Market Analysis from ForexMart

GBP/USD. March, 1, 2021 – Sterling is back below 1.4000

At the end of last week, the sterling fell to 1.3890 amid the global strengthening of the US dollar in the market. The current quote for the GBP/USD pair is 1.3950.

The head of the Bank of England said last Friday that the regulator expects negative growth in the first quarter of 2021. Andrew Bailey also noted that several sectors of the economy, including retail, hospitality and tourism, were hit harder than expected by the second and third blockages. At the same time, the head of the Central Bank also noted good prospects, mainly due to the active recovery of the trade sector.

The regulator also said that inflation risks are generally balanced. And the rise in British securities yields is a consequence of more positive news in the economy, rather than worries about inflation.

The UK released preliminary February business data today. PMI in manufacturing rose better than expected: 55.1 points against the forecast of growth to 54.9 and the previous value at 54.1 points. In the evening hours, you should pay attention to the similar figure from the USA.

USD/CAD. March 02, 2021 – Loonie weakens amid sales in the oil market

The USD/CAD pair dropped to the key support level of 1.25, which was already an obstacle in the way of the «bears» in 2016 and 2018. In 2021, the asset again failed to gain a foothold below this level and bounced off it, breaking through the resistance level of 1.27. The current quote for the pair is 1.2670.

The Canadian dollar was supported by a strong rise in oil prices to $66.75 per barrel last week. However, today oil is showing a correction, which also puts pressure on the CAD rate.

At the same time, the US dollar is receiving support from growing Treasury yields and positive economic statistics. In particular, in January, orders for durable goods grew by 1.4%, GDP in the IV quarter added 4.1%, and the number of applications for unemployment benefits amounted to 730 thousand, which is below forecasts.

Also, the dynamics of the dollar was influenced by the agreement in the US House of Representatives of Biden's proposed fiscal stimulus package in the amount of $1.9 trillion. Now the document must be approved by the Senate, and only then will it go to the president for signature.

On Tuesday, the RSI indicator is consolidating in the neutral zone, which signals the formation of a flat below the level of 1.27.

EUR/USD. March 3, 2021 – The pair is volatile in the corridor 1.20-1.21

The EUR/USD pair demonstrates high trading volatility in the 1.20-1.21 range. The current quote for the pair is 1.2060. Such activity was caused, first of all, by the comments of monetary politicians. In particular, Fed Governor Lael Brainard said that the outlook for the American economy looks positive, since the vaccination process is at an active pace and means an early victory over the pandemic. However, this does not mean that the Fed will quickly roll back its stimulus programs.

Brainard also noted that someday the Fed will have the opportunity to raise rates, but such changes will occur gradually.

Today we should pay attention to the final values ​​of the index of business activity in the services sector for February in the eurozone and Germany. The index of the euro zone came out better than the forecast (45.7 against expectations of 44.7 points), but the German index fell short of expectations (45.7 against 45.9 points). In the evening hours, the US will present statistics on the number of jobs in the private sector from the ADP. Average forecasts assume growth by 203 thousand after strengthening earlier by 174 thousand. The stronger the report, the better for the dollar.

GBP/USD. March 04, 2021 | Pound falls on weak statistics

The British pound weakened slightly during the trading session on Thursday. The current quote for the GBP/USD pair is 1.3950.

The pound was pressured by the weak macroeconomic data from Great Britain published yesterday. The index of business activity in the services sector in February fell from 49.7 to 49.5 points, and did not reach the level of 50 points. An additional driver of sales was the presentation of the UK budget, which provides for an increase in corporate taxes from 19% to 25% in order to combat the growing national debt of the country (2.1 trillion pounds). Also, the government will suspend the income tax thresholds until 2026.

Economic statistics from the United States came out ambiguous. In particular, the index of business activity in the service sector from Markit rose from 58.9 to 59.8 points, while the similar index from ISM, on the contrary, fell sharply from 58.7 to 55.3 points.

The markets were also somewhat disappointed by the ADP report on employment in the US private sector, which reflected the growth of jobs only by 117 thousand in February after increasing by 195 thousand in January. Today the focus is on the speech of the head of the US Federal Reserve Jerome Powell, as well as statistics on the dynamics of applications for unemployment benefits in the US.

EUR/USD. March 4, 2021 – Consolidation at 1.2050

The EUR/USD pair continues to trade within the 1.20-1.21 range. The current quote for the asset is 1.2050. Yesterday, the yield on US government bonds rose sharply, which contributed to the strengthening of the US dollar across the entire spectrum of the market.

However, the further rally of the dollar remains questionable, and the blame is weak macroeconomic statistics. According to the ADP, the economy created just 117,000 new jobs in February, which is significantly less than the forecast of 177,000. Activity in the service sector also slowed: the ISM index fell from 58.7 to 55.3 points. Today we should pay attention to the release of data on applications for unemployment benefits, it is expected that the figure will once again decline.

Also important will be the statistics from the eurozone, which can exert strong pressure on the euro. The 0.6% growth in retail sales in Europe is expected to be followed by a 1.2% decline. In other words, consumer prices have finally begun to rise, while sales have plummeted. This indicates the instability of inflationary processes in the region, and Europe may once again slide into deflation.

The RSI indicator has consolidated in the neutral zone, which signals the continuation of the sideways trend at 1.2050 until the release of economic statistics, which will determine the further direction of movement of the EUR/USD pair.

EUR/JPY. March 08, 2021 | Consolidation at 129.00

During the trading session last week, the EUR / JPY currency pair formed on the daily chart a series of pin-bar and doji candlestick patterns at the resistance level of 129.00, giving a signal to sell.

Earlier, the EUR / JPY price renewed its maximum since November 2018 at 129.96, after which it corrected to the nearest strong support level - 129.00. There is still not enough strength to continue the upward trend, it may first be necessary to rewrite local minimums near 128.00, near the EMA 21 line.

Selling according to this pattern is risky because it is against the trend. I will monitor the appearance of buy signals. The immediate target for growth and strong resistance is at the round level of 130.00.

EUR/USD. March 9, 2021 | Euro falls to 1.1830 after US Senate stimulus package

The US dollar continues to strengthen in the market, the current quotation of the EUR/USD pair is 1.1865. The American currency was supported by the adoption by the US Senate of the stimulus project in the amount of $1.9 trillion on Sunday. Trades in America are quite volatile due to fears of rising inflation, which may accelerate against the backdrop of new infusions of funds.

The EUR/USD pair may become one of the most vulnerable pairs this week. Moreover, the increased demand for the dollar and the «dovish» rhetoric of the European Central Bank may lead it to new 4-month lows.

In addition, the unexpected slowdown in industrial production in Germany from 1.9% to -2.5% also exerted strong pressure on the single currency. And combined with the low rates of vaccination, the protracted quarantine and the growth in the profitability of the public debt in Europe, this does not bode well for the euro.

Today it is worth paying attention to the third estimate of the eurozone's GDP, which should once again show an acceleration in the rate of economic decline from -4.3% to -5.0%. However, the two previous estimates showed the same results, and this fact is already incorporated into the value of the European currency. Therefore, we do not expect any strong movements during the day, and the pair will continue to trade in the area of ​​local minimums.

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.