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US Open Note – Stocks freeze, dollar flashes green and oil stabilizes
March 31, 2021 1:27 pmVideo
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Risk-off tone ahead of US employment data and Biden’s stimulus speech
Markets today appear withdrawn and seem to be conveying a sense of calm before the storm as investors anxiously await the US ADP employment results and the details of the next stimulus from President Joe Biden. The fairly muted risk appetite in stocks has benefited the greenback, providing it with some traction after it temporarily lost its dominance, plunging from today’s high of 93.44 as the European trading session opened. The dollar index managed to keep its footing above the 93.00 level and is currently at the level of 93.24.
The massive stimulus, which is directed for infrastructure no doubt will inevitably boost the US economy and the dollar, however, the details of whether the stimulus will be split into two parts and how it will be funded will probably be the fuel that reawakens markets. Should taxes be delayed, Treasuries could take a hit and rising yields could then further nourish dollar strength. US consumer confidence came in strong at 109.7 yesterday but today’s ADP employment figures have missed forecasts of 552K, coming in at 517K. This could suggest that Friday’s NFP forecast could be hard to beat and may cool market optimism somewhat. Nonetheless, clear confirmation that the US recovery is gaining pace moving into the Q2 now shifts to Friday’s NFP results.
Safe havens retained their muscle. The yen dipped from its high of $110.96 per dollar as the greenback slipped off its throne, though has regained traction off $110.50 per dollar, pulled by revived dollar strength. The swissie is consolidating around its high after the dollar took a blow and is currently holding at 0.9440 francs per dollar.
Gold’s meltdown found some helping hands around the March 8 trough of $1,677/oz, bouncing to $1,688/oz but the yellow metal’s outlook remains shadowed by gloomy clouds from dollar strength and higher yields.
Short lived euro pickup, pound holds firmer
The battered euro capitalised on its foothold around the 1.1700 mark as the dollar took a hit as the European session opened. However, Europe remains stricken by rising COVID-19 infections as the bloc continues to encounter setbacks from the AstraZeneca vaccine and a sluggish vaccine rollout. French consumer spending m/m fell and the bloc’s inflation figures didn’t deliver either, which was expected. Nevertheless, even though the ECB will continue to provide all necessary accommodative tools for the economy, the forthcoming jet fuel for the dollar will most likely steer the common currency further down.
Sterling also stepped higher with the minor dollar weakness, however it held near today’s highs even after the greenback rebounded. The EURGBP pair retested the 0.8500 level, but given the pound’s upper hand over the euro and its better economic activity reflected in today’s GDP q/q figures, which beat the forecast of 1.0% with a result of 1.3%, the bearish bias of the pair seems will prevail.
OPEC eyed for surprises
WTI oil remains largely unchanged around $60.25 per barrel ahead of oil inventories later today. OPEC is likely to rollover production cuts into May as they are cautious of lower demand. Europe’s lockdowns and a possible resurgence of COVID-19 variants could spell trouble for the oil price.
Upcoming are US pending house sales, due at 15:00 GMT and crude oil inventories at 15:30 GMT. President Biden’s speech at approximately 20:00 GMT will also be closely watched.
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