CFD Markets News and Forecasts — 12-04-2021

• Firms reported less uncertainty related to coronavirus pandemic and strengthening demand from weak levels
• Nearly two‑thirds of firms indicated their sales have reached or exceeded pre-pandemic levels
• Overall, measure of business outlook increased to +2.87 from +1.3 in winter survey, the highest reading since Q2 of 2018
• Business confidence across all regions has strengthened
• Domestic and foreign sales prospects have picked up from weak levels a year ago, but outlook remains challenging for firms tied to high-contact services
• Measure of future sales increased to +52 from +48 in winter survey
• Many businesses intend to increase their investment spending to meet growing demand and add needed capacity
• Measure of investment intentions over the next 12 months increased to +40 from +26 in winter survey
• Firms’ employment outlooks remain uneven; three-quarters of businesses reported that their staffing levels were not negatively affected by pandemic or have fully recovered, while many of these remaining one-quarter of firms do not expect a full return to pre-pandemic employment levels within the next 12 months
• Measure of hiring intention increased to +45 from +43 in winter survey
• Firms expect positive pressures on growth of their input prices, wages and output prices
• Inflation expectations increased but most remain in BoC's 1-3 percent inflation-control target range
• 55% of firms see inflation running above 2% (42% - 2 to 3% and 13% - above 3%), the highest level since 2018

FXStreet notes that the SEK has gone from the strongest performing major currency versus both the USD and EUR in 2020, to something of an also-ran, after a lacklustre Q1. In the view of economists at CIBC Capital Markets, the longer-term outlook remains relatively constructive despite current covid concerns, which are set to weigh on near-term SEK sentiment.  

“Forward-looking survey data continues to imply that activity should remain well supported, especially as we move towards H2. Of course as a small open economy, reliant upon both global trade and the performance of the German economy in particular, any signs of the eurozone recovery being materially delayed risk weighing on the SEK.” 

“The extension of the lockdown and near-term corporate dividend outflows provides near-term SEK headwinds, indeed, we have tempered relative outperformance versus the EUR over the forecast profile. However, with the global economy still set to register a strong rebound in 2021, we still retain a constructive long-term SEK bias.”

Results of a $58 bln 3-year U.S. Treasury note auction are due at 15:30 GMT.

Prior auction results:

• High yield: 0.355%
• Bid-to-cover: 2.69
• Indirect bid: 47.8%
• Direct bid: 18.2%

Bert Colijn, a Senior Economist at ING, believes that despite the improvement in Eurozone retail sales in February, the big rebound is yet to come in the months ahead, as non-essential retail stores are still closed in many countries.

"The February increase in Eurozone retail sales was seen in most countries but driven by boosts thanks to easing relief measures. However, they are still below the 6% level seen in October 2020."

"The big question is whether eurozone consumers are eager to consume when the economy reopens. With involuntary savings built up substantially over the course of last year, there is significant potential for a rebound. As we inch closer to the easing of restrictive measures, things are looking good for a consumption recovery. The immediate positive response in sales to the easing of mobility measures is a positive sign, which is also confirmed by survey data."

"Consumer confidence has been increasing, including a strong recovery of people indicating that they are looking to make major purchases in the months ahead, which should bode well for a strong 2021 GDP recovery."

• Growth is returning to the world economy
• Reshoring is a risky strategy for the world

U.S. stock-index futures fell slightly on Monday, as investors decided to take a pause after Wall Street reached fresh records last week, awaiting the start of the Q1 earnings season and the release of the crucial macro data later this week.

Global Stocks:

• UK, EU talks on Northern Ireland have been constructive 
• But there are still significant differences that need to be resolved
• British negotiator David Frost spoke to European Commission vice president Maros Sefcovic on Friday

(company / ticker / price / change ($/%) / volume)

Microsoft (MSFT) target raised to $280 from $270 at BMO Capital Markets

Tesla (TSLA) upgraded to Buy from Hold at Canaccord Genuity; target raised to $1071

Exxon Mobil (XOM) upgraded to Hold from Underperform at Jefferies; target $55

• Current coronavirus infection rate is "much too high" 
• Third wave may be the toughest yet 

GBP appreciated against most of its major counterparts in the European session on Monday as investors reacted positively to the fact that the English non-essential shops, pubs, gyms and some other businesses reopened today after three months of closures, as part of Stage 2 of Prime Minister Boris Johnson's lockdown exit roadmap. Stage 3 is to start no earlier than May 17.

Boris Johnson called the easing of restrictions "a major step forward in our roadmap to freedom".

"I'm sure it will be a huge relief for those business owners who have been closed for so long, and for everyone else, it's a chance to get back to doing some of the things we love and have missed," he noted.

FXStreet reports that economists at CIBC Capital Markets believe the AUD/USD pair is now in a period of consolidation, nonetheless with support for renewed appreciation remaining intact. 

“We have revised the path of AUD/USD appreciation to a moderately slower pace over the next quarters. We forecast the aussie at 0.8000 at end-2Q, the same level reached at end-February.”

“Support for AUD gains continues from a rebound in domestic activity and much improved trade and current account positions. Global reflation has not had the same influence of late as early in the year, though Australia’s leverage to higher commodity prices both generally, and specifically to industrial commodities in light of enthusiasm for infrastructure spending, remains important underlying support.” 

“One risk factor arises from ongoing waves of coronavirus infections in various countries, being a possible headwind to already bullish global growth forecasts. The AUD as a high beta to global risk appetite might be seen as vulnerable in that circumstance.”

FXStreet reports that S&P 500 above 4068 can keep the immediate risk higher for a test of test pivotal resistance from the top of its 12-year trend channel from the 2009 low at 4115. With the market already moving into “extreme” territory, economists at Credit Suisse would then be highly cautious of an interim top here. 

“Whilst we maintain an immediate bullish stance and continue to look for the rally to extend further, ideally to our 4200 Q2 objective, we now move to a more cautious footing given the market is now in ‘extreme ‘territory. Above 4130 and we see resistance next at 4138 ahead of Fibonacci projection resistance at 4175/79. Our ‘ideal’ roadmap remains for a push to our 4200 target but we essentially now look for a top in this 4175/4200 zone.” 

April 14

Before the Open:

Goldman Sachs (GS). Consensus EPS $8.93, Consensus Revenues $11744.16 mln

JPMorgan Chase (JPM). Consensus EPS $2.94, Consensus Revenues $29967.18 mln

Wells Fargo (WFC). Consensus EPS $0.65, Consensus Revenues $17422.96 mln

April 15

Before the Open:

Bank of America (BAC). Consensus EPS $0.62, Consensus Revenues $21666.16 mln

Citigroup (C). Consensus EPS $2.18, Consensus Revenues $18340.19 mln

Delta Air Lines (DAL). Consensus EPS -$2.75, Consensus Revenues $4046.64 mln

PepsiCo (PEP). Consensus EPS $1.12, Consensus Revenues $14543.96 mln

Taiwan Semi (TSM). Consensus EPS NT$5.25, Consensus Revenues NT$360040.89 mln

UnitedHealth (UNH). Consensus EPS $4.37, Consensus Revenues $69128.82 mln

After the Close:

Alcoa (AA). Consensus EPS $0.47, Consensus Revenues $2647.23 mln

April 16

Before the Open:

Morgan Stanley (MS). Consensus EPS $1.58, Consensus Revenues $13483.60 mln

FXStreet notes that the optimism over strong economic recovery post-COVID-19 got a boost in Canada on Friday with another far stronger than expected jobs report. Economists at MUFG Bank see the current backdrop as broadly favourable for the Canadian dollar. 

“The Canada gain in employment in February and March combined is equivalent to a 4.5mn gain in US employment (US jobs market is 8 times larger). The data is bound to help provide the Bank of Canada with confidence over the outlook for growth when they meet to decide on monetary policy next Wednesday.”

“The COVID-19 situation will undoubtedly make the BoC somewhat cautious when it meets next week but will also embolden the government to push ahead with additional fiscal stimulus when it announces its budget on 19th April – two days before the BoC meets. Further fiscal stimulus and concerns over the indebtedness in the housing market plus the surge in jobs will likely be enough to result in the BoC signalling some degree of slowing in sovereign bond purchases.”

“We see the current backdrop as broadly favourable for CAD. It has underperformed since the start of April after being the top G10 performer in Q1. We do not see a change in the fundamentals that helped CAD performance in Q1 and hence do not expect the current underperformance to persist.”

FXStreet notes that AUD/USD faltered ahead of the near-term downtrend. According to Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, a close below the 0.7564 February low is set to trigger a slide to the 0.7463 mark. 

“AUD/USD spent last week capped by initial resistance at the 0.7663/93 late February low and late March high and also along the 55-day ma at 0.7713 and this leaves the market on the defensive.” 

“A close below the 0.7564 February low would probably trigger a slide to the 0.7463 December 21 low and the 0.7413 September high.”

FXStreet reports that the Credit Suisse analyst team notes that EUR/GBP not only maintains a base above 0.8643/65 but the close above 0.8574 on Friday has also seen a bullish “reversal week” established to reinforce the likelihood for a deeper recovery to 0.8732 initially, then 0.8851/61. 

“EUR/GBP not only maintains a base above key resistance at 0.8643/65 – the 23.6% retracement of the December/April fall, highs from the second half of March and 55-day average – but with the market closing above 0.8574 on Friday a bullish ‘reversal week”’ has also been established to further reinforce a recovery story.” 

“We stay biased higher and look for a move to 0.8732 next, then the 38.2% retracement at 0.8761.”

“Big picture, we would not rule out a move back to the ‘neckline’ to the medium-term top and 50% retracement at 0.8851/61, but with this expected to prove a much tougher barrier.” 

FXStreet reports that economists at CIBC Capital Markets discuss EUR/CHF prospects.

“As the OECD view the CHF as being more than 30% overvalued versus its main trading partner, the EU, it’s unsurprising that the bank remains mindful of CHF valuations.”

“The easing in the value of the currency has prompted the central bank to moderate their language on the topic of the currency. The SNB now commits to act merely ‘as necessary’. However, SNB President Jordan was quick to reassure the market that the bank had not materially changed its stance, affirming there was no change in the bank’s commitment to the currency. Therefore, we would expect any CHF gains to be contained by the central bank.” 

“For the CHF the backdrop of continued policy inertia, rates have been at -0.75% since 2015, points towards relative underperformance against those currencies which are set to witness more direct gains from rising global growth.” 

Reuters reports that according to fresh data from European Central Bank, bad loans at euro zone banks fell to a new low in the last quarter of 2020.

The ratio of non-performing loans at banks supervised by the ECB fell to 2.63%, the lowest level since the start of supervision in 2015, despite a deep and scarring recession that will likely weigh on the economy for years to come.

Banks have managed to improve their loan books thanks to abundant government guarantee and credit schemes that are keeping the corporate sector afloat, even as large swathes of the services has been kept mothballed for the past year due to lockdown measures.

But reality is bound to catch up with banks, the ECB has warned, arguing that some lenders are unprepared and have insufficient warning systems in place.

Still, banks have ample capacity to absorb a rise in soured credit as their combined common equity tier 1 (CET1) ratio rose to 15.62%, also the highest since the start of supervision.

According to estimates from Eurostat, in February 2021, the seasonally adjusted volume of retail trade rose by 3.0% in the euro area and by 2.9% in the EU, compared with January 2021. Economists had expected a 1.5% increase. In January 2021, the retail trade volume fell by 5.2% in the euro area and by 4.6% in the EU.

In February 2021 compared with February 2020, the calendar adjusted volume of retail trade decreased by 2.9% in the euro area and by 2.2% in the EU. Economists had expected a 5.4% decrease.

In the euro area in February 2021, compared with January 2021, the volume of retail trade increased by 6.8% for non-food products and by 3.7% for automotive fuels, while it decreased by 1.1% for food, drinks and tobacco. In the EU the volume of retail trade increased by 6.2% for non-food products and by 2.4% for automotive fuels, while it decreased by 0.8% for food, drinks and tobacco.

In the euro area in February 2021, compared with February 2020, the volume of retail trade decreased by 13.0% for automotive fuels and by 5.5% for non-food products (within this category mail orders and internet increased by 37.3%), while it increased by 1.9% for food, drinks and tobacco. In the EU, the volume of retail trade decreased by 11.9% for automotive fuels and by 4.0% for non-food products (mail orders and internet increased by 37.9%), while it increased by 1.8% for food, drinks and tobacco.

FXStreet reports that economists at CIBC Capital Markets said that the Canadian dollar could hold on to Q1 gains into mid-year.

“The enthusiasm around crude prices that drove those gains has since been tempered as OPEC+ has announced that it will begin a partial rollback of supply cuts over the next three months. Combined with a USD that is now broadly back in favor with investors, CAD no longer looks set to appreciate, and will likely remain steady into mid-year.”

“While the Bank of Canada might nudge its earlier timetable for rate hikes up a bit, its messaging will look dovish relative to what’s now priced in, which would entail a hike in mid-2022. In contrast, both Fed talk and market expectations will be bringing forward the timetable for US rate hikes as the recovery progresses. A shift to a more hawkish tone from the Fed will pave the way for a weaker Canadian dollar in H2 and through 2022.”

“Look for USD/CAD to trade in the 1.30-1.34 range next year. That level will be more constructive for exports, as the experience of the last decade suggests that Canada isn’t competitive with a sub-1.30 dollar-Canada exchange rate.” 

Reuters reports that Germany's BDI industry association raised its forecast for export growth this year to 8.5% from 6%, citing demand from the United States and China.

BDI also cut its forecast for Germany economic growth to 3% from 3.5% due to ongoing lockdown measures in Europe's biggest economy.

BDI said its forecast assumes that measures to halt the spread of the coronavirus are largely lifted by early autumn.

FXStreet reports that economists at Nordea said that the aussie is expected to continue losing ground in the coming weeks.

“The Chinese credit impulse is likely to continue losing steam, commodity prices might thus start to cool (an unwind of the doom loop), then there’s RBA vs Fed, and Fed is clearly the more hawkish of the two – letting yields rise.” 

“Countries such as Australia and New Zealand will have to remain under very strict border-control to prevent a winter-surge in the virus from May and onwards, and judging from the pricing of global central banks, one could argue that RBA is priced more aggressively than RBNZ, leaving AUD more vulnerable to a negative virus seasonality on the Southern Hemisphere compared to the NZD.”

CNBC reports that the International Monetary Fund has revised its growth forecast upward for the Middle East and North Africa region, as countries recover from the coronavirus crisis.

Real GDP in the MENA region is now expected to grow 4% in 2021, up from the fund’s October projection of 3.2%.

However, the outlook will vary significantly across countries depending on factors such as vaccine rollouts, exposure to tourism and policies introduced, the IMF said.

Jihad Azour, director of the IMF’s Middle East and Central Asia department, said the recovery would be “divergent between countries and uneven between different parts of the population.”

″(The) vaccine is an important variable this year, and the acceleration of vaccination could contribute to almost one additional percent of GDP in 2022,” he said.

FXStreet reports that economists at Rabobank discuss EUR/GBP prospects.

“We expect that the market will have to see signs of clear improvement in UK economic data to push GBP to fresh highs for the year vs. the EUR.”

“The Scottish elections next month could provide a hiccup for the pound if the results lead to another push for an independence referendum. Northern Ireland news is also in the headlines. The current spate of violence in the province can in part be linked to Brexit. That said, in the last few years GBP investors have a tendency to pay little heed to Northern Ireland politics.”

“While investors may approach GBP with more caution in the weeks ahead, the EUR’s fundamentals remain uncompelling in view of the slow vaccine roll-out and the additional covid related restrictions in parts of Europe.” 

“We have dialled our one month EUR/GBP forecast back to 0.86 but still see scope for the currency pair to creep back to 0.85 on a 3 three-month view.”

During today's Asian trading, the US dollar rose against the euro and the australian dollar, but declined against the yen.

The head of the US Federal Reserve System (Fed), Jerome Powell, said on Sunday that the regulator is unlikely to raise interest rates this year. "I can guarantee that the Fed will do everything possible to support the economy for as long as necessary for a full recovery," he said. Powell also noted that the economy could soon "start to grow much faster, and job creation will happen faster." At the same time, the head of the Fed believes that the main risk for the economy at the moment is a new jump in Covid diseases.

Investors on Monday expect the publication of data on retail sales in the euro zone in February.

The pound consolidated against the US dollar. British Prime Minister Boris Johnson said that more than 7 million people in the UK have completed the vaccination process against the COVID-19 coronavirus. The population of the UK is about 66 million people. The authorities of the country intend to gradually remove the restrictions imposed to combat this disease as the vaccination campaign against COVID-19 progresses.

The ICE index, which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), rose by 0.09%.

RTTNews reports that the Bank of Japan said that overall bank lending in Japan was up 6.3 percent on year in March, coming in at 579.994 trillion yen. That's up from 6.2 percent in February.

Excluding trusts, lending was up 5.9 percent to 503.872 trillion yen after gaining 5.8 percent in the previous month.

In the first quarter of 2021, overall lending was up 6.2 percent on year, lending excluding trusts gained 5.8 percent and lending from trusts jumped 8.5 percent.

FXStreet reports that FX Strategists at UOB Group noted the upside momentum in EUR/USD could extends the mid-1.1900s in the next weeks.

Next 1-3 weeks: “We have held a positive view in EUR since early last week. In our latest narrative from last Wednesday, we highlighted that the ‘rebound in EUR could extend further’ and ‘the next major resistance is at 1.1945’. Since then, EUR has not been able to make much headway on the upside. Upward momentum has waned but there is still chance for EUR to move higher to 1.1945. Only a breach of 1.1830 (‘strong support’ level previously at 1.1770) would indicate that the upside risk has dissipated.”

Reuters reports that Bank of Japan (BOJ) data showed that Japanese wholesale prices marked their first annual increase in more than a year in March, a sign that rising commodities costs are pinching corporate margins, adding inflationary pressure to the world’s third-largest economy.

The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 1.0% in March from a year earlier. The jump, which was at the fastest pace since January 2020, exceeded a median market forecast for a 0.5% increase and followed a 0.6% fall in February.

Most of the gain was driven by a 29% spike in prices of non-ferrous metals goods and 9.8% rise in those for oil products and coal, showing how a rebound in global demand for commodities pushed up costs for Japanese firms.

Compared with a month ago, wholesale prices jumped 0.8% in March to mark the biggest gain since October 2019.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2041 (3191)

$1.1984 (1051)

$1.1948 (2112)

Price at time of writing this review: $1.1885

Support levels (open interest**, contracts):

$1.1835 (1267)

$1.1770 (2170)

$1.1688 (2866)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date May, 7 is 44714 contracts (according to data from April, 9) with the maximum number of contracts with strike price $1,2000 (3191);

GBP/USD

$1.3873 (503)

$1.3844 (334)

$1.3820 (141)

Price at time of writing this review: $1.3675

Support levels (open interest**, contracts):

$1.3645 (360)

$1.3598 (1981)

$1.3569 (964)

Comments:

- Overall open interest on the CALL options with the expiration date May, 7 is 12452 contracts, with the maximum number of contracts with strike price $1,4200 (3731);

- Overall open interest on the PUT options with the expiration date May, 7 is 15524 contracts, with the maximum number of contracts with strike price $1,3700 (1981);

- The ratio of PUT/CALL was 1.25 versus 1.41 from the previous trading day according to data from April, 9

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.