The Market Week – March Week 2
The focus of attention once again this week is on the Bond market, as US treasuries spiked and the 10-year yield holds over 1.50% ahead of a key auction. The USD continued its recovery and gold continued to decline. The enormous $1.9 trillion fiscal stimulus bill could be law as early as this week, paving the way for an equally large Infrastructure Bill.
The ECB rate decision and press conference will be top of the shop tomorrow, with Ms. Lagarde expected to continue to promote the merits, flexibility and virtues of the PEPP along with updates for growth, employment, and inflation. The FED meet next week.
Unemployment remains stubbornly high globally, however, the March NFP reading was a potential turn of the tide, with the headline close to 400,000 and a significant upgrade for last month. Last week’s new US unemployment claims were in line with expectations at 745,000. This week they are expected to tick lower to 730,000.
The vaccine rollouts continue to gain traction globally, lifting sentiment and adding to the fears of rising inflation and over-heating economies. This week last year markets were crashing, and circuit breakers were pausing trading activity due to the size and volatility of the moves. The US has vaccinated over 92 million citizens and the EU has completed 42 million vaccinations.
This week FX volatility cooled as the USD held on to its recent gains. The USDIndex rallied to highs at 92.50, levels not tested since November. EURUSD breached below 1.2000 and moved to also test November lows at 1.1835. USDJPY spiked to 9-month highs at 109.20 before settling towards 108.50. Cable broke below 1.3900 and oscillated between this and the next round number at 1.3800.
Global stock markets turned more volatile, as the USA100 moved into and then bounced from a 10% correction from February’s all-time highs. The USA500 tested below the 50-day moving average moving as low as 3720 before testing the key 3900 level again. High valuations and an expected rise in inflation weigh on further gains.
The Gold price fell again this week, and even tested below a key technical support level at $1685 before once again recovering $1700. The non-yielding asset continues to be pressured lower. Bitcoin had another volatile week but found support at $50,000 and has since tested $55,000.
USOil prices peaked just 4 cents shy of $68.00, following the OPEC+ decision not to increase production during April and the Houthi attack on a key Saudi oil refinery. Prices cooled below $65.00 ahead of weekly inventories.
The yield on the US 10-Year Treasury Note rotates around the psychological 1.500 level, as it tested new 1-year highs again this week at 1.624 ahead of a $38 billion auction later today. The fiscal and potential infrastructure stimulus packages, the rapid uptake of the vaccines and opening of the economy added to the spectre of rising inflation are combining to keep yields the main focus of the markets.
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Stuart Cowell
Head Market Analyst
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