March – 2021, Monthly Outlook
February was positive for stock market recoveries and negative for safe-havens, as the virus infections declined and vaccinations increased, both significantly. Gold had its worse month since 2016, the Japanese Yen traded 1.7% lower and stocks hit new all-time highs. A soaring rise in the 10-year T-note yield confirmed the prospect of a growing economy in the US and possible inflation spikes, while money flows into the Stock Markets, signaled a move from tech-based stocks to commodity base and cyclicals, especially energy-related and financial stocks.
Currencies
Dollar: The Dollar strengthened initially in the first week of February and continued the recent uptrend from January, but the USD index traded lower for the rest of the month, until the final two trading days when there was a significant sell off in US treasuries and a rise in the 10-yr. yield to over 1.6%. The USDIndex gained back part of the previous week’s losses and finally ended the month at 90.90 with a 0.42% monthly gain. The Fed meeting (16-17) and likely wait and see policy announcement with no change in rates will be the month’s key event. March starts with NFP on the 5th, with CPI data on the 10th and Retail Sales on the 16th the other main events for USD, while Housing data is due in the second part of the month.
Euro: February published data, which covered January and February 2020, were mostly positive, which helped to support the EUR against the USD, generally reflecting the weaker USD and the USDIndex movement. During the second part of the month EURUSD hit seven-week highs in the 1.2240s, up more than 2.4% from the February low. Besides the stronger USD, in the final days of the month, ECB officials also raised the dovish rhetoric, upping the pressure on the EUR. For the month ahead, the ECB interest rate decision, Policy Statement, and Press Conference are the headline events on 11th. The key driver is German Manufacturing and employment data on the 1st and 2nd of the month. EZ CPI data will be published on March 17th.
Sterling: The “currency of the month” with a more than 1.7% gain against USD. Cable touched the highest level since April 2018 at 1.4240 on February 24. With Brexit over, the market participants’ focus has turned to economic data and the local domestic agenda. The main driver for sentiment for Sterling has been the rapid vaccine rollout. GDP and CPI economic data also supported the currency, but a key driver has been BOE officials downplaying negative and even lower interest rates. Again, the BoE Interest Rate Decision (March 18) will be the month’s main event, but it is not just about rates. The calendar has PMI (3rd) and Retail sales (9th), Industrial and Manufacturing production (12th), Claimant Count Change (23rd), CPI (24th) and finally GDP on the last day of March.
Yen: Unlike the Pound, Yen, in line with CHF, was the worst performer of the month, as Safe-Haven demand decreased with the amazing performance of global stock markets. USDJPY traded down to 104.42 from highs of 106.66 in the first trading week of the month but recovered into month end to close at 106.55, with a monthly gain of 1.7%. Important dates for the coming month are employment data (2nd), GDP (9th), the BOJ Interest Rate announcement and monetary policy meeting (19th), and then the release of meeting minutes (24th).
Aussie: The Aussie rose against all crosses during February. AUDUSD traded above the open price of 0.7620 all month to touch a three-year high above 0.8000, before the sharp decline of the past two trading days of the month, to close lower at 0.7698, for a 0.88% monthly gain. The Aussie, similarly, to other commodity currencies, followed the uptrend rally of commodities, especially industrial-based commodities, as well as the recovering Chinese economy (Australia’s biggest export destination). The RBA announcement on February 2nd, with no change to policy and confirmation of unchanged rates alongside a more hawkish than expected statement supported the AUD, while Trade Balance, Retail sales, and unemployment rate also were other supportive factors. For the month ahead, the RBA rate decision and monetary policy meeting on 2nd will be the key event, while other events are GDP (3rd), retail sales, and Trade balance (4th), RBA Minutes (16th), and Employment numbers (18th).
Loonie: USOil prices hit new 13-month highs, showing a near 28% gain on the year so far, which marks a substantial improvement in the trade of the Canadian economy. USDCAD posted a 3-year low at 1.2466 on the 27th, before a sharp return above 1.2745 which was caused by both stronger USD and weaker USOil, before finally closing the month at 1.2736, for a decline of -0.27%. On the data front, February had few positives for CAD, except CPI. A weak job number and the USOil rally ignored expected retail sales. The three key events for March are the BOC Interest Rate announcement (10th), GDP (2nd), jobs numbers (12th), CPI (17th), and Retail Sales (19th).
Emerging: The Ruble was trading below the 75 level against the Dollar by the middle of the month to touch 73.09, the lowest since 17 December 2020. RUB could have benefited from the weaker USD during the month, as TRY did, however, political changes in Moscow and talks about new sanctions, in line with stronger USD in the last days of the month, caused RUB to make a U-turn to close the month at 74.58. However, thanks to a strong Oil rally, RUB gained 2.3% against USD in February. USDZAR ended the month almost at the same level, 21 pips lower than the 15.1648 at the beginning of the month. Price movement also confirms that more than being dependent on ZAR, the movement was based on USD changes. The Turkish central bank, with higher repo rates, was trying to support the Lira, while USD weakness also helped the trend; however, in the second half of the month, after weaker economic data and the stronger USD, TRY lost its strongest position in the past 6 months against USD at 6.8915 and ended the month 0.90% lower, at 7.3503.
Commodities
Gold: Gold has suffered a series of setbacks since its futures hit record highs of nearly $2,090 an ounce in August 2020. However, after vaccinations started back in November and December 2020, the yellow metal decline continued to print its worst monthly loss since 2016 with falling under $1725. For now, as many analysts believe, with vaccination progress, Gold recovery seems unlikely before the hard crash. In March, we will know the final fate of the Biden Stimulus Package, however, Gold’s trend directly depends on market sentiment about economic recovery, so we need to carefully follow GDP, PMI, CPI, Job, and Consumer Expectations data from the US, EZ, and China.
Silver: Unlike Gold, which is almost 8.5% lower than the price at the end of 2020, XAGUSD is currently trading more than 1% above its 2020 close. February started with a sharp decline, but with recovery hopes as Silver, like other precious and industrial metals, compensated the lower demand of its safe haven. For the month ahead also, positive economic news will still be supporting it.
Oil: USOil, with a more than 19% gain in February, printed one of its best monthly performances. According to the Energy Information Administration’s latest monthly report, US crude oil production fell to an average of 11.063Mbpd in December 2020. In line with recovery reports, these data, while EIA estimates that US crude production will not exceed the levels seen in 2020 until 2022, could still support the market rebalancing. On the other hand, the voluntary production cut of 1Mbpd by Saudi Arabia will continue during March. For the month ahead, eyes will be on the OPEC+ meeting on March 4, as well as IEA and OPEC monthly reports.
Indices
US: Clear messages from the White House about more stimulus packages and raising the minimum wage supported the dovish policy of the FED, while the third vaccine for COVID-19 from J&J also supported the market in February. The USA500 gained 2.77%, and the USA30 rose by 3.47%, but the tech-based index of the USA100 lost -0.04%. After new record highs in the middle of the month, all three indices had a correction, but for the USA100, the correction coincided with the EU copying Australia’s lead in making Big Tech pay for news. Also, more openings will decrease the volume of online commerce, which will be more negative for the USA100.
Europe: Generally, EU based indices had a good and profitable performance. EU30, GER30, FRA40, and UK100 all closed the month way above their open prices. Stock markets are totally in a good mood and happy from reopening news, while the vaccination process is growing faster. Eurozone and UK economic data are also supporting this optimism at the moment.
Japan: The JPY225, with a 5.31% gain in February, it had the best performance of the main indices. The price change, however, followed Wall Street, with gains in the first half and weakness in the second half. The overall economic outlook is improving alongside inflation, GDP, CPI, and industrial productions. Besides positive economic data, hopes on holding the Olympics in the summer will help the Japanese financial markets and the economy’s positive attitude.
EQUITY PICK OF THE MONTH – GameStop & ViacomCBS
As the pandemic hit many retailers, GameStop was not different than others and was planning to close 450 stores this year. However, a rebellion against Wall Street changed the game, and its shares became one of the hottest stocks of not just January, but probably the whole year; it became a February equity pick as management took advantage of this jump and the price again rose above $140 from a February low of $40, indicating that it does not intend to go down. However, ViacomCBS Inc. (VIAC), with a 40.45% gain, takes the place of Wall Street’s best performance.
Cryptocurrencys
In the last months of 2020, PayPal, one of Elon Musk’s first companies, announced that it will support digital currencies, boosting BTC as well as other digital currencies to a new record high, and then in February, one of his more recently established companies, (Tesla) also invested in BTC and started accepting it as a payment method, moving the crypto market to touch above $52K. Even in the last days of the month, as it fell back under $45K, technically BTC, LTC, and ETH are all moving above main MAs and technically still moving in clear uptrends on Daily charts. In smaller charts, momentum indicators have started signalling a technical correction. Some ECB and FOMC members are warning about cryptocurrencies, while also confirming that digitalization is the future of currencies.
Click here to access our Economic Calendar
Ahura Chalki
Regional Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
