Forex-novosti i prognoze od 07-05-2021

• Jobs report is nowhere near what was expected
• Anecdotally, it seems that employers paying more than $15/hour for entry level jobs have less trouble hiring
• Fed is making real progress on inflation mandate
• U.S. economy is likely to return to trend growth level by the end of the year
• Jobs report shows frictional challenge matching available workers to jobs
• Surge in demand put producers behind the curve in hiring
• Inflation will occur this year but businesses are not shifting medium-term pricing plans
• The issue is not on demand side but supply side of workers matched to jobs

The Commerce Department announced on Friday the U.S. wholesale inventories rose 1.3 percent m-o-m in March, being slightly worse than the preliminary estimate of a 1.4 percent m-o-m gain.

Economists had forecast the reading to stay unrevised at 1.4 percent m-o-m.

In February, wholesale inventories rose 0.9 percent m-o-m.

According to the report, durable goods inventories jumped 1.2 percent m-o-m in March, while stocks of nondurable goods climbed 1.4 percent m-o-m.

In y-o-y terms, wholesale inventories surged 4.5 percent in March.

The Ivey Business School Purchasing Managers Index (PMI), measuring Canada’s economic activity, fell to 60.6 in April from 72.9 in March.

A reading above 50 signals expansion, while a reading below 50 indicates contraction.

Within sub-indexes, the employment measure dropped to 58.0 in April from 62.7 in the previous month, while the inventories indicator decreased to 59.4 from 61.7 and the supplier deliveries gauge declined to 37.8 from 39.6. At the same time, the prices index rose to 80.0 in April from 75.1 in March.

• Says he is confident that pricing pressures will be transitory

U.S. stock-index futures rose on Friday, as tech stocks surged as U.S. Treasury yields dropped sharply after disappointing U.S. employment report for April.

Global Stocks:

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

Statistics Canada reported on Friday that the number of employed people decreased by 207,100 m-o-m in April (or -1.1 percent m-o-m) after an unrevised gain of 303,100 m-o-m in the previous month. This was the largest decrease in Canada’s employment since January and reflected the tightening of public health measures in several provinces in late March and early April.

Economists had forecast a decline of 175,000 m-o-m.

Meanwhile, Canada's unemployment rate rose to 8.1 percent in April from 7.5 percent in March, exceeding economists’ forecast for 7.8 percent. The April increase in rate was driven by gains in the number of people searching for work (+67,000; +4.9 percent m-o-m) and those on temporary layoff (+57,000; +37.6 percent m-o-m).

According to the report, full-time employment decreased 129,400 (or -0.8 percent m-o-m) in April, while part-time jobs fell by 77,800 (or -2.3 percent m-o-m).

In April, the number of public sector employees declined by 13,200 (or -0.3 percent m-o-m), and the number of private sector employees plunged by 203,700 (or -1.7 percent m-o-m). Meanwhile, the number of self-employed increased 9,700 (or +0.4 percent m-o-m) last month.

Sector-wise, employment dropped both in goods-producing (-0.3 percent m-o-m) and service-producing (-1.3 percent m-o-m) businesses.

Raytheon Technologies (RTX) initiated with a Buy at Redburn

The U.S. Labor Department announced on Friday that nonfarm payrolls rose by 266,000 in April after a revised 770,000 increase in the prior month (originally a gain of 916,000). This marked the smallest monthly advance in three months.

According to the report, notable job gains in leisure and hospitality (+331,000 jobs in April), other services (+44,000), and local government education (+31,000) were partially offset by employment declines in temporary help services (-111,000) and in couriers and messengers (-77,000).

The unemployment rate edged up to 6.1 percent in April from 6.0 percent in March.

Economists had forecast the nonfarm payrolls to increase by 978,000 and the jobless rate to drop to 5.8 percent.

The labor force participation rate increased to 61.7 percent in April from 61.5 percent in the previous month, while hourly earnings for private-sector workers rose 0.7 percent m-o-m (or $0.21) to $30.17, following an unrevised 0.1 percent m-o-m drop in March. Economists had forecast the average hourly earnings to be flat m-o-m in April. Over the year, average hourly earnings went up 0.3 percent in April, following an unrevised 4.2 percent jump in March.

The average workweek increased by 0.1 hour to 35.0 hours in April, being above economists' forecast for 34.9 hours.

• Bias towards policy easing at BoE is now less pronounced
• Downside risks are less pronounced now
• Big open question is whether Covid leads many people to decide they no longer need to be based in cities and instead work remotely

FXStreet reports that the Credit Suisse analyst team notes that EUR/USD has essentially held price support at 1.1995/90, just ahead of the 38.2% retracement of the March/April rally at 1.1980, whilst also maintaining a foothold above the 55 and 200-day moving averages. The next important resistance is seen at 1.2103, then 1.2151/60.

“EUR/USD has essentially held price support at 1.1995/90. The subsequent recovery has been impressive, with the market breaking above price resistance at 1.2077, which suggests strength back to 1.2103 initially, ahead of the 1.2151/60 recent high.”

“Beyond the 1.2151/60 region, the pair can see resistance at the 78.6% retracement of the Q1 fall at 1.2212, with scope for the 1.2243 February high.” 

“Support moves to 1.2044 initially, then 1.2013, with key still 1.1990/80. Below here is needed to rekindle thoughts of a near-term top for a test of next supports at 1.1948/42, the 200-day average and mid-April ‘outside day’ low.” 

USD was under pressure in the European session on Friday as investors awaited the release of the U.S.  jobs report for April, due at  12:30 GMT.

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, dropped 0.12% to 90.84.

It is expected that April's jobs report will show that the U.S. economy is accelerating strongly out of the coronavirus pandemic, bolstering investors’ risk appetite and putting more pressure on the safe-haven U.S. dollar. On the other hand, better-than-anticipated data could heighten inflation worries and expectations that the U.S. Federal Reserve might be forced to start reducing its monetary stimulus sooner than expected that, in turn, could lift the U.S. bond yields and the U.S. currency as well.

Economists forecast the U.S. economy to have added 978,000 jobs last month after 916,000 in March. The unemployment rate is seen to decrease to 5.8% in April from 6% in March.

• We will step up efforts to prevent the spread of virus variants
• We are aiming to administer 1 million vaccine shots a day to the public
• We will obtain 50 million doses from Pfizer by the end of September
• We are aware that there are worries among the public about holding Olympics

GBP/USD set to eventually climb to the 1.49/1.51 zone - Credit Suisse

FXStreet reports that economists at Credit Suisse maintain a core and long-held bullish outlook for GBP/USD with a major base having been established last year above 1.3514. Cable is set to look for an eventual move above 1.4017 to resolve the current range higher for a move to our 1.4302/77 first bull target and eventually 1.49/1.51.

“GBP/USD extends its consolidation in its now well-defined 1.3669/1.4017 range. With a major base in place above 1.3514 we maintain our long-term bullish outlook but with a break above 1.4017 needed to resolve the range higher for a move back to 1.4237, then our 1.4302/77 first core upside target – the 2018 highs and 38.2% retracement of the 2014/2020 bear trend.” 

“Big picture, we continue to look for an eventual move to 1.49/1.51.”

“Near-term support moves to 1.3802/01.”

FXStreet reports that UOB Group’s FX Strategists noted USD/JPY could have reached a short-term peak.

24-hour view: “USD subsequently dipped to 108.99 before closing slightly lower at 109.08 (-0.09%). Downward momentum has improved a tad and the bias for today is tilted to the downside. However, any weakness is likely limited to a test of 108.80. The strong support at 108.55 is unlikely to come under threat.”

Next 1-3 weeks: “In our narrative from Tuesday (04 May, spot at 109.10), we indicated that ‘there is scope for the current USD strength to extend to 109.95’. We added, ‘the prospect for such a move is not high for now’. Since then, USD has not been able to make any headway on the upside. Shorter-term momentum is beginning to shift to the downside and the risk of a short-term top has increased. However, only a break of 108.55 (no change in ‘strong support’ level) would indicate that the positive phase that started late last week has ended.”

USD/CAD set to fall towards the 1.2062 2017 low - Credit Suisse

FXStreet reports that in line with their bullish commodity view, economists at Credit Suisse maintain a medium-term preference for commodity currencies, especially the Canadian dollar. The USD/CAD is set for a test of the 2017 low at 1.2062, in their view.

“With commodities surging and completing a long-term base, the commodity currencies should benefit, with USD/CAD one of our favored expressions. 

“We still see scope for USD/CAD to eventually test the 1.2062 [2017] low, which is expected to be a tough initial barrier.” 

American Intl (AIG) reported Q1 FY 2021 earnings of $1.05 per share (versus $0.12 per share in Q1 FY 2020), beating analysts’ consensus estimate of $1.01 per share.

AIG closed Thursday's trading session at $50.17 (+2.66%).

FXStreet reports that AUD/USD stays bid above trendline support at 0.7665. Once the 0.7849 mid-March high is cleared, the aussie is set to test the end of February high at 0.8007, as reported by Commerzbank.

“AUD/USD continues to consolidate below the recent highs at 0.7815/49.” 

“Dips are indicated to remain shallow and the market should remain underpinned by the 0.7665 support line.”

“Above 0.7849 targets the end of February high at 0.8007. Longer-term, the 0.8135 2018 high is in play.”

eFXdata reports that ANZ Research discusses NZD outlook and sees a scope for NZD strength in the near-term.

"In the short term, the risk is that this apparent optimism will manifests in a higher NZD as markets respond to what we expect to be some strong data releases in the US that are likely to fuel risk appetite. Strategically, broad USD performance and an acceleration in global growth are expected to be the primary drivers for the NZD/USD. Overall, the NZD crosses benefit from themes of economic reopening and developed market vaccine rollouts, which we expect to outweigh uncertainty associated with emerging market growth," ANZ adds.

FXStreet reports that FX Strategists at UOB Group said that USD/CNH now risks further pullbacks, although a strong support emerges at 6.4400. 

Next 1-3 weeks: “Two days ago, we highlighted that while the recent negative phase in USD has ended, ‘it is too soon to expect a recovery’. We held the view that USD could trade between 6.4650 and 6.5020. We did not anticipate the rapid manner by which USD plummeted to 6.4635 yesterday. The risk has shifted to the downside again but in view of the nascent build-up in downward momentum, any weakness may find it difficult to break 6.4400. The downside risk is deemed intact as long as USD does not move above 6.4820 (‘strong resistance’ level).”

Bloomberg reports that according to Governing Council member Martins Kazaks, the European Central Bank could decide to scale back its emergency bond-buying program as early as next month if the euro-area economy doesn’t deteriorate.

Kazaks said the ECB’s pledge to keep financing conditions favorable remains key to determining how much support the 19-nation bloc needs to recover. 

“If financial conditions remain favorable, in June we can decide to buy less,” Kazaks said. “Flexibility is at the very core of PEPP.

Kazaks, one of 25 policy makers on the Governing Council, said the economy will need significant monetary stimulus well beyond the end of the pandemic. That’s being delivered by emergency bond purchases, negative interest rates, and targeted long-term loans that keep banks’ credit terms for companies and households loose.

His argument suggests that further increases in market interest rates in the weeks and months to come needn’t trigger more ECB support. He said pent-up consumer demand, bank lending and spillovers from massive U.S. fiscal stimulus pose upside risks to the economic outlook.

CNBC reports that Boris Johnson’s Conservative Party has convincingly won a byelection in the northern English town of Hartlepool, cementing its strong footing across working class areas of the country that once belonged to the rival Labour party.

Jill Mortimer beat Labour’s Paul Williams by nearly 7,000 votes, according to the count announced on Friday morning, and became the first Conservative to win the seat since the constituency was formed in 1974.

By-elections happen in Britain when a seat in the House of Commons becomes vacant in between general elections.

The win will be seen as a barometer for the current mood in the country as it slowly reopens after strict coronavirus lockdown measures. Johnson was heavily criticized for the initial response to the pandemic, and with over 127,000 reported fatalities, Britain has one of the worst death rates in Europe and the world.

According to the report from IHS Markit/CIPS, UK construction companies signalled a strong increase in output volumes during April, with continued recoveries seen in civil engineering activity, commercial work and house building. Workloads were boosted by the fastest rise in overall new orders since September 2014. On a less positive note, demand and supply imbalances meant that the rate of input cost inflation picked up for the seventh month in a row to its highest since the survey began in April 1997.

The headline UK Construction PMI Total Activity Index posted 61.6 in April, down only fractionally from March's six-and-a-half year peak of 61.7. Any figure above 50.0 indicates an overall expansion of construction output. The index has posted in growth territory in ten of the past eleven months, with January 2021 the exception.

Commercial work (index at 62.2) was the best-performing broad category of construction output in April, although the rate of expansion eased slightly since March. Survey respondents widely commented on a boost to client demand from rising business confidence and the reopening of the UK economy.

Civil engineering (index at 61.5) bucked the softer overall growth trend in April and signalled its fastest speed of recovery since September 2014. Construction companies often cited increased levels of work on major infrastructure programmes, including contract awards from HS2 and Highways England.

Meanwhile, house building (index at 61.2) continued to rise at a strong pace in April, but the rate of growth eased from March's recent peak (64.0). There were widespread reports of robust demand for residential building projects and new housing developments.

Looking ahead, construction companies remained highly upbeat about their growth prospects in April. More than half of the survey panel (57%) expect a rise in business activity during the next 12 months, while only 7% forecast a decline.

CNBC reports that according to one political expert, China-Australia ties won’t be getting back on track anytime soon.. 

James Laurenceson, director of the Australia-China Relations Institute at the University of Technology Sydney, described the strained relations between Canberra and Beijing as “complicated.”

“I see no prospects on the horizon for this relationship to get back on track,” he told, adding both sides are blaming each other for the breakdown in dialogue.

The National Development and Reform Commission, China’s economic planning agency, announced Thursday that it will “indefinitely suspend all activities under the framework of the China-Australia Strategic Economic Dialogue.”

The move comes after some officials in Australia launched unspecified measures “out of a Cold War mindset” to disrupt cooperation with China, the NDRC statement said.

China’s decision to halt all activities under the framework is more than just a symbolic move, said Laurenceson.

He called Beijing’s latest move a “tit-for-tat” retaliation to show its displeasure after Australia scrapped two Belt and Road deals last month.

Australian Minister for Trade Tourism and Investment Dan Tehan on Thursday expressed his disappointment at the suspension of talks.

FXStreet reports that economists at TD Securities note that cable continues to exhibit all the hallmarks of a range-trade and highlight the key levels to watch.

“The MPC simply delivered few surprises to the overall market. As such, the decision to taper asset purchases looks fully priced. As a final component, part of the underwhelming response could be the result of the way in which the move was communicated. We think the FX market will still see this as a policy shift – at least at the margin.”

“A GBP/USD break higher looks path-dependent upon both a softer NFP reading and a pledge by the Scottish pro-independence factions not to pursue an immediate referendum if they achieve the expected majority in the local parliament. That set of outcomes would likely be followed by another test of the recent range highs in the 1.4000/10 zone. A clear break above would naturally target a move toward the late February peak at 1.4237.” 

“We think dip buyers are likely to emerge first around 1.3800, while the double-bottom at 1.3670 should provide fairly robust support at this stage.”

Reuters reports that U.S. President Joe Biden said a corporate tax rate between 25% and 28% could help pay for badly needed infrastructure, suggesting he could accept a lower rate than what he has proposed in his search for Republican support for the funding.

"The way I can pay for this, is making sure that the largest companies don't pay zero, and reducing the (2017 corporate) tax cut to between 25 and 28" percent, Biden said.

In his $2.3 trillion infrastructure plan, the Democratic president initially proposed raising the corporate tax rate from 21% to 28%. Tax experts and congressional aides told in April that a 25% rate would be a likely compromise.

"What I'm proposing is badly needed" and will be paid for, said Biden, dismissing the "trickle down" theory that helping businesses and the wealthy will benefit those farther down the economic ladder. "We've got to build from the bottom up and the middle out."

During today's Asian trading, the US dollar was almost unchanged against the euro and the yen.

Market participants expect the publication of data on the US labor market for April. The Ministry of Labor will release the report today at 12: 30 GMT. According to data released yesterday, the number of Americans who applied for unemployment benefits for the first time last week decreased by 92 thousand - to 498 thousand people. This is the lowest value of the indicator since the beginning of the COVID-19 pandemic.

The ICE index, which tracks the dollar's performance against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), fell 0.03%.

The index retreated from the two-week highs it hit earlier this week, after US Treasury Secretary Janet Yellen said the Federal Reserve may have to raise interest rates to avoid overheating the US economy. Later, Yellen noted that she is not trying to make forecasts about the Fed's policy, nor to make recommendations to the Fed.

The pound rose slightly against the US dollar. The Bank of England at the end of the May meeting kept the base interest rate at 0.1%. The regulator also decided to leave the volume of the asset purchase program at the level of 895 billion pounds, including the purchase of government bonds in the amount of 875 billion pounds. Analysts did not expect changes in the parameters of the Bank of England's monetary policy. At the same time, the Bank decided to reduce the pace of asset repurchases, as some experts expected.

According to the report from Insee, in March 2021, output increased in the manufacturing industry (+0.4%, after −4.8%), as well as in the whole industry (+0.8%, after −4.8%). Economists had expected a 2.0% increase in the whole industry.

Compared to February 2020 (the last month before the first general lockdown), output remained in sharp decline in the manufacturing industry (−6.8%), as well as in the whole industry (−5.9%).

In March, output bounced back in mining and quarrying, energy, water supply (+2.9% after −5.0%) and in the manufacture of food products and beverages (+1.3% after −2.5%). It continued to expand in the manufacture of coke and refined petroleum after the shutdown of several refineries in late 2020 (+7.0% after +12.2%). Output grew moderately in the manufacture of machinery and equipment goods (+0.4% after −5.4%) and in the manufacture of transport equipment (+0.4% after −11.2%). It was unchanged in “other manufacturing” (stability after −4.1%).

In March 2021, output yet remained in sharp decline compared to its February 2020 level in most industrial activities. It slumped in the manufacture of transport equipment (−25.1%), more sharply in the manufacture of other transport equipment (−29.6%) than in the manufacture of motor vehicles, trailers and semi-trailers (−18.1%). It also plummeted in the manufacture of coke and refined petroleum (−14.9%). Compared to February 2020, output decreased more moderately in “other manufacturing” (−4.3%) and in the manufacture of machinery and equipment goods (−3.2%), thanks in particular to the sub-branches of pharmaceuticals (+5.4%) and electrical equipment (+4.3%).

Over the first quarter of 2021, manufacturing output was up compared to the same quarter of 2020 (+1.7%), as well as output in the whole industry (+1.7%). However, this relatively moderate evolution masks very large differences between months, given that the beginning of the general lockdown took place in mid-March 2020.

The Federal Statistical Office (Destatis) reports that in March 2021, German exports were up 1.2% and imports 6.5% on a calendar and seasonally adjusted basis compared with February 2021. Destatis also reports that, after calendar and seasonal adjustment, exports were 0.9% lower and imports 6.7% higher than in February 2020, the month before restrictions were imposed due to the coronavirus pandemic in Germany.

Germany exported goods to the value of 126.5 billion euros and imported goods to the value of 105.9 billion euros in March 2021. Compared with March 2020, exports increased by 16.1%, and imports by 15.5% in March 2021. These are the highest nominal values ever recorded for monthly exports and imports in foreign trade statistics.

The foreign trade balance showed a surplus of 20.5 billion euros in March 2021. In March 2020 the surplus of the foreign trade balance amounted to 17.2 billion euros. The calendar and seasonally adjusted surplus of March 2021 was 14.3 billion euros.

The German current account of the balance of payments showed a surplus of 30.2 billion euros in March 2021, which takes into account the balances of trade in goods (+23.3 billion euros), services (+1.3 billion euros), primary income (+10.0 billion euros) and secondary income (-4.5 billion euros). In March 2020, the German current account showed a surplus of 24.8 billion euros.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2152 (2001)

$1.2106 (1974)

$1.2077 (1615)

Price at time of writing this review: $1.2056

Support levels (open interest**, contracts):

$1.2037 (2029)

$1.1997 (1619)

$1.1949 (2234)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date May, 7 is 63450 contracts (according to data from May, 6) with the maximum number of contracts with strike price $1,1700 (3067);

GBP/USD

$1.4051 (1159)

$1.4002 (1115)

$1.3956 (930)

Price at time of writing this review: $1.3895

Support levels (open interest**, contracts):

$1.3839 (752)

$1.3797 (427)

$1.3768 (334)

Comments:

- Overall open interest on the CALL options with the expiration date May, 7 is 11659 contracts, with the maximum number of contracts with strike price $1,4200 (2932);

- Overall open interest on the PUT options with the expiration date May, 7 is 19694 contracts, with the maximum number of contracts with strike price $1,3700 (1956);

- The ratio of PUT/CALL was 1.69 versus 1.70 from the previous trading day according to data from May, 6

* - 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.

According to provisional data of the Federal Statistical Office (Destatis), in March 2021, production in industry was up by 2.5% on the previous month on a price, seasonally and calendar adjusted basis. Economists had expected a 2.3% increase. Compared with March 2020, the increase in calendar adjusted production in industry amounted to 5.1%.

Compared with February 2020, the month before restrictions were imposed due to the corona pandemic in Germany, production in March 2021 was 4.3% lower in seasonally and calendar adjusted terms.

In March 2021, production in industry excluding energy and construction was up by 0.7%. Within industry, the production of intermediate goods showed an increase of 1.2% and the production of consumer goods of 2.9%. The production of capital goods decreased by 0.4%. Outside industry, energy production was up by 2.4% in March 2021 and the production in construction increased by 10.8%.

In February 2021, the corrected figure on the production in industry showed a decrease of 1.9% (provisional: -1.6%) from January 2021.