- Nov 16, 2021
The European currency shows flat dynamics of trading against the US dollar during the Asian session, consolidating near local highs from March 1 and the level of 1.1170. Activity on the instrument at the beginning of the week remains restrained, as investors expect new drivers to appear on the market. The day before, the single currency showed a fairly active growth, supported by weak data from the US, while European statistics had only a slight impact. Revised data from the United States showed GDP growth in Q4 2021 at 6.9%, which is 0.1% worse than previous estimates. The Gross Domestic Product Price Index for the same period also corrected from 7.2% to 7.1%. European data pointed to a further decline in business sentiment in the euro area, as well as a record increase in inflation in Germany. The Economic Sentiment Indicator in the eurozone fell from 113.9 to 108.5 points in March, while the market forecast was at 109 points. Business Climate Indicator in March fell from 1.79 to 1.67 points. Consumer Confidence Level remained at -18.7 points. Consumer inflation in Germany accelerated from 5.1% to 7.3% in March, setting a new record high and beating market forecasts of 6.3%.
The British pound is losing ground against the US dollar during the morning session, again preparing to test 1.3100 for a breakdown. Expectations of an early conclusion of a peace agreement between Russia and Ukraine are noticeably declining as market participants state that there have been no significant changes after the negotiations, and fundamental contradictions still persist. The Russian Federation is reducing the number of its troops in one direction in order to strengthen it in another, and this, of course, does not lead to a ceasefire. Demand for risky assets is also falling as April approaches, when new rules for paying for Russian gas come into force. If the mechanisms for paying for "blue fuel" in rubles do not work or the EU countries take a principled position, this may negatively affect supplies. It should be noted that the UK's dependence on resources from Russia is significantly lower than, for example, Germany's. Today, investors are focused on the updated statistics on the dynamics of GDP in the UK for Q4 2021. According to current forecasts, the British economy will grow by 1% QoQ and 6.5% YoY.
The Australian dollar is falling against the US currency during the Asian session, correcting after an uncertain rise on Tuesday and Wednesday. The instrument is testing the level of 0.7500 for a breakdown, reacting to the general deterioration in market sentiment. Hopes for a de-escalation of the conflict in Eastern Europe are gradually fading, as the rhetoric of the Russian and Ukrainian authorities does not share the initial optimism expressed by the participants in the negotiation process in Istanbul. Meanwhile, the risks of possible interruptions in Russian energy supplies to Europe and a number of other countries are growing, since Russian President Vladimir Putin earlier ordered to switch to gas payments in rubles. Weak macroeconomic statistics from China exerts pressure on the AUD positions today. Non-Manufacturing PMI in March showed a sharp decline from 51.6 to 48.4 points, while analysts expected a further increase in the indicator to 53.2 points. NBS Manufacturing PMI for the same period fell from 50.2 to 49.5 points, which also turned out to be worse than market forecasts at 49.9 points.
The US dollar shows a fairly active growth against the Japanese yen during trading in Asia, recovering from a two-day "bearish" rally, which led to the renewal of local lows from March 25. Demand for the US currency is gradually recovering as expectations decline for a peace deal between Russia and Ukraine that would bring about a final ceasefire. However, buyers are cautious ahead of the publication of a large block of US macroeconomic statistics at the end of the week. The focus is on the Friday's report on the labor market for March, which will re-evaluate the prospects for an earlier tightening of monetary policy by the US Federal Reserve during the May meeting. Earlier, the Chair of the regulator, Jerome Powell, did not rule out the possibility of raising the rate by 50 basis points at once in response to the continuing growth of inflationary pressure. Macroeconomic statistics from Japan published today does not have a significant impact on the dynamics of the instrument. Industrial Production in the country rose by 0.1% in February, which is noticeably better than the 0.8% decline a month earlier, but falls far short of market expectations at 0.5%. In annual terms, Production added 0.2% after falling 0.5% in January.
Gold prices are slightly declining during the morning session, correcting after rising the day before, which was triggered by the return of negative market sentiment. On Tuesday, gold updated the local lows of February 25, reacting to the optimistic statements of the participants in the negotiation process between Russia and Ukraine after the meeting in Istanbul. There was hope that military activity would noticeably decrease, and soon a ceasefire could be announced altogether. However, later it became clear that such conclusions were made somewhat prematurely. The Russian Federation announced the preservation of fundamental contradictions in the positions of the parties (first of all, on the territorial issue), and explained the reduction in the number of troops in two directions by the planned regrouping of the military contingent. Trading activity on the instrument remains low today. Investors are waiting for the emergence of new drivers in the market, and are also preparing for the publication of the March report on the US labor market on Friday.