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I. Market focus:
At the beginning of Friday session, speculations about new personnel reshuffles in the White House were in the focus of market participants’ attention. The media reported about another removal in the U.S. President Donald Trump’s team - of the national security adviser Herbert McMaster. However, the White House Press Secretary later denied the reports, saying that the president and his national security adviser “have a good working relationship and there are no changes at the NSC.” Nevertheless, observers do not exclude a possibility of McMaster’s replacement, but, this move is not expected to happen immediately. On the back of these reports, the dollar eased slightly in the morning, correcting after yesterday’s growth. The focus of market participants shifts to the Fed meeting, which will be held next week. So, no significant movements in the dollar are likely until the announcement of the outcomes of this meeting.
The New Zealand dollar had decreased significantly by the beginning of the European session, responding to the release of the business activity data for the manufacturing sector of New Zealand’s economy. The data indicated a slowdown in the expansion of activity, triggering the sale of the New Zealand currency. As in the case with the U.S. dollar, the New Zealand dollar is likely to show consolidation over the next few days, as the RBNZ meeting will be held next week, and until it is completed, investors will not change their outlooks for the New Zealand currency.
The main scheduled events of the final session of the week will be the U.S. statistics on the housing market (building permits and housing starts; 12:30 GMT), industrial production (13:15 GMT) and consumer sentiment (14:00 GMT).
II. The market highlights are:
The data from the Labor Department revealed on Thursday the number of applications for unemployment benefits fell in-line with economists expectations last week, pointing to tightening labor market conditions. According to the report, the initial claims for unemployment benefits decreased 4,000 to 226,000 for the week ended March 10. Economists had expected 226,000 new claims last week. Claims for the prior week were revised downwardly to 230,000 from the initial estimate of 231,000. Meanwhile, the four-week moving average of claims dropped only 750 to 221,500 last week. It was the 158th straight week that claims remained below the 300,000 threshold, the longest streak since 1970.
The report from the New York Federal Reserve showed on Thursday that manufacturing activity in the New York region expanded robustly in March. According to the survey, NY Fed Empire State manufacturing index stood at 22.50 in this month compared to an unrevised 13.10 in February. Economists had expected the index to come in at 15.20. Anything below zero signals contraction. According to the report, the new orders index rose 3.3 points to 16.8 this month, while the shipments index boosted 14.5 points to 27.0, indicating strong growth in orders and shipments. The unfilled order index increased 7.8 points to 12.7 in March, while the delivery time index advanced 5.1 points to 16.2, and the inventories index edged up 0.7 points to 5.6. At the same time, the employment index decreased 1.5 points to 9.4. The prices paid index went up 1.7 points to 50.3, and the prices received index rose 0.9 points to 22.4, indicating that the prices continued to pick up this month.
The Federal Reserve Bank of Philadelphia announced on Thursday its index of current manufacturing activity in the region fell to 22.3 this month from an unrevised reading of 25.8 in February. Nearly 37 percent of the manufacturers reported increases in overall activity this month, while 14 percent reported decreases, the FRB of Philadelphia said. The details of the report were mostly higher. The indexes for new orders index (+11.2 points m-o-m to 35.7 in March), the shipments index (+16.9 points m-o-m to 32.4), the unfilled orders (+5.6 points m-o-m to 20.1), delivery times (+9.5 points m-o-m to 14.0) and inventories (+17.4 points m-o-m to 16.5) all surged this month. At the same time, the indicators for the prices received (-3.2 points m-o-m to 20.7) and the prices paid for inputs (-2.4 points m-o-m to 42.6) decreased. The employment index (+0.4 points m-o-m to 25.6) was little changed.
The U.S. Labor Department reported on Thursday the import-price index, measuring the cost of goods ranging from Canadian oil to Chinese electronics, rose 0.4 percent m-o-m in February after a revised 0.8-percent m-o-m increase in January (originally a 1.0 percent gain). Economists had expected prices to go up 0.2 percent m-o-m last month. According to the report, higher nonfuel prices (+0.5 percent m-o-m) more than offset declining prices for imported fuel (-0.6 percent m-o-m) last month. Over the 12-month period ended February, import prices grew 3.5 percent. At the same time, the price index for U.S. exports recorded a 0.2 percent m-o-m gain in February, following a 0.8-percent m-o-m growth in January. Higher prices for both agricultural (+0.6 percent m-o-m) and nonagricultural (+0.2 percent m-o-m) exports contributed to the increase in overall export prices. Over the past year, the price index for exports rose 3.3 percent.
The National Association of Homebuilders (NAHB) said on Thursday its housing market index (HMI) edged down to 70 in March from a downwardly revised 71 in February (originally 72). Economists forecast the HMI to come in at 71. A reading over 50 indicates more builders view conditions as good than poor. The HMI components were mostly lower in March. The index charting sales expectations in the next six months fell two points to 78, and the indicator gauging buyer traffic fell three points to 51, while the current sales measure held steady at 77. NAHB Chairman Randy Noel said that “Builders’ optimism continues to be fueled by growing consumer demand for housing and confidence in the market. However, builders are reporting challenges in finding buildable lots, which could limit their ability to meet this demand.” At the same time, NAHB Chief Economist Robert Dietz noted that “A strong labor market, rising incomes and a growing economy are boosting demand for homeownership even as interest rates rise. With these economic fundamentals in place, the single-family sector should continue to make gains at a gradual pace in the months ahead.”
The latest Bank of New Zealand’s (BNZ) survey showed Friday that expansion activity in New Zealand's manufacturing sector decelerated in February. The BusinessNZ Performance of Manufacturing Index (PMI) came in at 53.4 last month compared to a January’s reading of 54.4. A reading above 50 indicates expansion in economic activity, whereas a reading below that level represents contraction. Overall, the index has remained in expansion in all months since October 2012. Most sub-indexes fell in February, with those for deliveries (-2.2 points m-o-m to 52.7), finished stocks (-1.8 points m-o-m to 51.1) and new orders (-1.3 points m-o-m to 54.1) driving the deceleration. Meanwhile, the employment index recorded a gain (+2.0 points m-o-m to 54.8). BusinessNZ’s executive director for manufacturing Catherine Beard noted that while the PMI remained in positive territory, the last three months have shown a levelling off of expansion. “The proportion of positive comments in February (51.4%) was very close to the result in January (50.7 percent). A number of respondents have noted the sluggish start to the year, with a dip in new orders being a common message”. At the same time, BNZ Senior Economist, Doug Steel said that “there is no doubting the Performance of Manufacturing Index has slowed over recent months. That said, February’s PMI is hardly weak in exactly matching its long term average”.
III. Market Situation
The currency pair EUR/USD rose slightly, correcting after yesterday's decline, which was driven by the release of the upbeat U.S. macroeconomic data, an increase in the 10-year Treasury yield, and news about imposition by the U.S. of new sanctions against Russia. Today, investors will focus on inflation data for the Eurozone (it is expected that the CPI rose 0.2 percent m-o-m and 1.2 percent y-o-y in February), as well as the U.S. statistics on housing market, industrial production and the consumer sentiment index. Experts note that the short-term direction of the U.S. dollar might be determined by the tone of Fed's post-meeting statement, which will be released next week. The U.S. central bank will hike interest rates next week, all 104 economists polled by Reuters March 5-13 said. They also expect three more increases to follow this year, driven by a solid labor market underpinning optimism. A few weeks ago, experts predicted more than two additional hikes after March. Resistance level - $1.2444 (high of March 7 and 8). Support level - $1.2272 (low of March 9).
The currency pair GBP/USD fell sharply in early trading, but then erased all losses, and refreshed the session's high. The upward correction of the pair was reflected a new wave of weakness of the U.S. currency. Meanwhile, the pound was underpinned by the reports about the progress in the Brexit negotiations: the UK and the European Union (EU) agreed to intensify the negotiations to end the deadlock over how to police the Irish border when the U.K. leaves the block. With an almost empty economic calendar in the UK ahead, traders will focus on the news about Brexit talks, the dynamics of the U.S. currency and the general market sentiment toward risky assets. Resistance level - $1.4068 (high of February 26). Support level - $1.3873 (low of March 13).
The currency pair AUD/USD tumbled at the beginning of the session, touching its low of March 7, but then retreated to the opening level amid the resumed weakening of the U.S. dollar and higher commodity prices. Market participants also paid attention to the report of the Fitch Ratings, saying that the Reserve Bank of Australia (RBA) is expected to raise interest rates once by 25 basis points in 2018, and by 50 basis points in 2019. Overall, experts note that the Australian dollar is likely to remain vulnerable to risk trends. Resistance level - AUD0.7915 (high of March 14). Support level - AUD0.7756 (low of March 6).
The currency pair USD/JPY fell sharply, hitting yesterday's low, due to an increased demand for a "safe" yen amid renewed concerns over North Korea and fears of a global trade war. The yen’s firmness was also attributable to the reports that Special counsel Robert Mueller, investigating alleged Russian meddling in the U.S. presidential election in 2016, subpoenaed the Trump Organization for business documents. According to media, some of these documents may contain information related to Russia. The reports mark the first publicly known time that Mueller has demanded documents related to President Donald Trump's businesses. An important event for the yen was also the announcement that Japan's parliament approved the reappointment of Bank of Japan (BoJ) governor Haruhiko Kuroda for another five-year term. Masazumi Wakatabe and Masayoshi Amamiya were approved as the BoJ deputy governors as well. Resistance level - Y107.27 (high of March 13). Support level - Y105.24 (low of March 2).
U.S. stock indexes closed mixed on Thursday, as gains in industrials and technology were offset by drops in the energy and consumer staples. The market sentiment was hurt by reports that Special Counsel Robert Mueller subpoenaed the Trump Organization for documents, some of which relate to Russia. Focus also was on a batch of economic data. The data from the Labor Department revealed the number of applications for unemployment benefits fell in-line with economists expectations last week, pointing to tightening labor market conditions. According to the report, the initial claims for unemployment benefits decreased 4,000 to 226,000 for the week ended March 10. Economists had expected 226,000 new claims last week. It was the 158th straight week that claims remained below the 300,000 threshold, the longest streak since 1970. The report from the New York Federal Reserve showed that manufacturing activity in the New York region expanded robustly in March. According to the survey, NY Fed Empire State manufacturing index stood at 22.50 in this month compared to an unrevised 13.10 in February. Economists had expected the index to come in at 15.20. Anything below zero signals contraction. The Federal Reserve Bank of Philadelphia announced its index of current manufacturing activity in the region fell to 22.3 this month from an unrevised reading of 25.8 in February. The U.S. Labor Department reported the import-price index rose 0.4 percent m-o-m in February after a revised 0.8-percent m-o-m increase in January (originally an 1.0 percent gain). Economists had expected prices to go up 0.2 percent m-o-m last month. Over the 12-month period ended February, import prices grew 3.5 percent. The National Association of Homebuilders (NAHB) said its housing market index (HMI) edged down to 70 in March from a downwardly revised 71 in February (originally 72). Economists forecast the HMI to come in at 71. A reading over 50 indicates more builders view conditions as good than poor.
Asian stock indexes closed mostly lower on Friday amid fears of a global trade war and concerns over continuing personnel turmoil in the U.S. President Donald Trump’s administration.
European stock indexes are expected to trade mixed in the morning trading session.
Yields of US 10-year notes hold at 2.83% (0 basis points)
Yields of German 10-year bonds hold at 0.58% (0 basis points)
Yields of UK 10-year gilts hold at 1.44% (0 basis points)
Light Sweet Crude Oil (WTI) futures traded higher. Crude oil for delivery in April settled at $61.27 (+0.13%). The crude oil prices rose slightly, helped by the broad weakness of the U.S. dollar. Investors also continue to digest the International Energy Agency’s (IEA) most recent Oil Market Report. According to the report, global oil demand is expected to increase 1.5 million barrels per day to 99.3 million barrels per day in 2018. At the same time, the supply from non-Opec nations is forecast to grow by 1.8 million barrels per day in 2018 to 59.9. Market participants are awaiting weekly data on the U.S. oil rig count from Baker Hughes.
Gold traded at $1,317.20 (+0.06%). Gold prices edged up, due to the weakness in the U.S. currency and persisting demand for safe-haven assets. The index, measuring the value of the U.S. dollar relative to a basket of six major currencies, fell 0.16 percent to 90.00. Since gold prices are tied to the dollar, a stronger dollar makes the precious metal more expensive for holders of foreign currencies.
IV. The most important scheduled events (time GMT 0)
Harmonized CPI ex EFAT
BOE Quarterly Bulletin
Foreign Securities Purchases
JOLTs Job Openings
Reuters/Michigan Consumer Sentiment Index
Baker Hughes Oil Rig Count
|remaining time till the new event being published|
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