Gold struggles to break through 1740 resistance, risk stays on downside

    Focus remains on 1740.32 minor resistance in Gold, to determine whether a short term bottom was formed at 1676.65. The conditions for a stronger rebound are there, with some support seen from medium term falling channel support. Also, bullish convergence condition condition is displayed in 4 hour MACD.

    Decisive break of 1740.32 will also be the first sign that the fall from 2075.18 has completed as a three wave correction. Attention will then be turned back to 55 day EMA (now at 1792.68).

    However, rejection by 1740.32, followed by break of 1676.65, could extend the correction to 50% retracement of 1160.17 to 2075.18 at 1617.67 or even 61.8% retracement at 1509.70, before forming a bottom.

    S&P 500 hits new record, on track to 4096 projection level

      S&P 500 and DOW closed at new record highs overnight on improving growth prospect in the US economy. In particular, the S%P 1500 airlines index jumped more than 4%, indicating some revival in optimism in the sector. Nine of the 11 major S&P sector indices closed higher, led by utilities and real estate.

      S&P 500’s rise from 3233.94 is still in progress. As part of the up trend from 2191.86, it’s still on track to 61.8% projection of 2191.86 to 3588.11 from 3233.94 at 4096.82. Though, prior retreat through 55 day EMA, while brief, was a warning of loss of upside momentum. Daily MACD is also limited below down trend line. SPX will need to quickly climb further to press upper trend line to solidify momentum. Otherwise, there is risk of topping around 4096.82.

      RBA Minutes: Fiscal support tapering an important near-term issue

        Minutes of RBA’s March 2 meeting reiterated that Australia economic recovery was “well under way” and had been “stronger than expected previously”. An important near-term issue was household and business adjustment to the tapering of some fiscal support measures. “Members noted that there may be a temporary pause in the pace of improvement in the labour market, as many firms had already adjusted the size of their workforces.”

        Wage and price pressures had been subdued and were “expected to remain so for several years”. The Board will “look through” the “transitory fluctuations in inflation” due to changes in balance of supply and demand during the pandemic. Underlying inflation was expected to remain below 2% target over both 2021 and 2022.

        Also, members affirmed that cash rate will be maintained at 0.10% for “as long as necessary”. Negative rate was viewed as “extraordinarily unlikely”. Conditions for a rate hike are not expected to be met “until 2024 at the earliest.

        Full minutes here.

        US Empire State manufacturing rose to 16.1, substantial employment increases expected

          US Empire State manufacturing general business conditions rose to 17.4 in March, up from 12.1, above expectation of 14.5. Expectations for six months ahead rose 1.5, from 34.9 to 36.4.

          More importantly, number of employees for six months ahead jumped from 14.8 to 16.6. Average employment work week for six months ahead rose from 14.3 to 201.

          New York Fed said, “The index for future employment rose to its highest level in over ten years, suggesting that firms widely expect to increase employment in the months ahead.”

          Full release here.

          BoE Bailey: Rise in rates consistent with change in economic outlook

            BoE Governor Andrew Bailey told BBC radio, “we watch rates in financial markets very closely.” “We have seen some increase in rates over the last month or so as have other countries,” he said. “My view is that is consistent with the change in the economic outlook.”

            “Our current view of inflation is that it will get back towards our 2% target,” he added. “It will get back towards that level in the next two or three months. The important question here is: will that be sustained?”

            “I’m saying we will need to see evidence that the trend in the economy and therefore the trend in inflation is sustainable simply because of the uncertainty and the huge effect of the Covid shock.”

            “This Covid effect on the economy is huge so what we are saying on the recovery is the economy will get back by the end of this year to where it was at the end of 2019. That’s good news but let’s be realistic: it’s no more than getting back to where we were pre-Covid.”

            AUD turns weaker against CAD and NZD

              Australian Dollar is turning weaker against other commodity currencies at the start of the week. AUD/CAD’s fall from 0.9988 resumes today and hits as low as 0.9643 so far. The rejection by 55 day EMA is a sign of near term bearishness. Overall, such decline is seen as correcting whole up trend from 0.8058 to 0.9988. Hence, further fall is expected  as long as 0.9795 resistance holds. It should target 0.9247 cluster support, 38.2% retracement of 0.8058 to 0.9988 at 0.9251, to complete the correction.

              AUD/NZD’s steep retreat today suggests rejection by 1.0825 resistance. But outlook is less clear than AUD/CAD. Price actions from 1.0415 are seen as the second leg of the whole pattern from 1.0420, which could be quite unpredictable by nature. For now, another rise will be mildly in favor as long as 1.0717 support holds. Break of 1.0840 resistance will extend the rebound from 1.0415 to retest 1.1042 high. However, firm break of 1.0840 could bring deeper decline back to 1.0538 support, or even below.

              China industrial production surged 35.1% yoy, retail sales rose 33.8% yoy

                January-February data from China showed strong rebound from the pandemic hit period of last year. Both manufacturing and consumption started the year on a strong footing. Industrial production rose 35.1% yoy , above expectation of 30.0% yoy. Retail sales rose 33.8% yoy, above expectation of 32.0% yoy. Fixed asset investment rose 35.0% yoy, below expectation of 40.0% yoy.

                The National Bureau of Statistics said that economy could show a sharp rebound in Q1 from a year earlier. But there are still imbalances in the recovery and support for consumption is needed. Also, time is needed to see recovery in manufacturing investment. Small firms are facing many difficulties.

                RBA Lowe: Business investment yet to click into gear

                  RBA Governor Philip Lowe reiterated in a speech that economic recovery was “quicker and stronger” than expected. But “we still have a long way to go”, with unemployment rate at 6.4% and economy operating “well short of its capacity”. Inflation and wages growth were also lower than RBA would like. It’s “going to take some time” before we reach our goals.

                  “one piece of the recovery that is yet to click into gear is business investment”. There was a pick-up late last year, but it’s “still a long way to go” to get back to pre-pandemic level, which was “low by historical standards” already. It’s important to continue and broaden business investment recovery to have a “strong and durable recovery”.

                  Full speech here.

                  NIESR expects UK GDP to contract -2.4% in Q1

                    NIESR said with smaller than expected fall in UK GDP in January, they forecasts a -2.4% contraction in Q1. That would leave the GDP in Q1 around -9% lower than its level in Q4 of 2019, the quarter before the pandemic.

                    “While January’s lockdown has unsurprisingly hit the hospitality, retail and education sectors, returning to levels of output last seen in summer 2020, many other sectors have not been affected to anything like the same extent as they were last year. With February and March likely to see activity at similar levels, this provides further support for the view that the fall in the first quarter of 2021 may be smaller than expected. The pace of recovery from the second quarter will depend on whether vaccines continue to roll out according to plan, whether further mutations or outbreaks bring about a resurgence in the virus, and how quickly public confidence returns.” Rory Macqueen Principal Economist – Macroeconomic Modelling and Forecasting.

                    Full release here.

                    US PPI jumped to 2.8% yoy, highest since 2018

                      US PPI rose 0.5% mom in February, above expectation of 0.3% mom. Annually, PPI jumped to 2.8% yoy, up from 1.7% yoy, above expectation of 2.7% yoy. It’s also the largest increase since October 2018.

                      PPI ex foods, energy and trade services rose 0.2% mom, matched expectations. Annually, PPI ex foods, energy and trade services rose 2.2%, highest since May 2019.

                      Full release here.

                      Canada employment rose 259k in Feb, unemployment rate dropped to 8.2%

                        Canada employment grew 259k or 1.5% in February, well above expectation of 98k. Part-time jobs increased 171k while full-time jobs rose 88k. Unemployment rate dropped -1.2% to 8.2%, well below expectation of 9.2%. That’s also the lowest level since March 2020. Labor force participation ware was unchanged at 64.7%.

                        Full release here.

                        Eurozone industrial production rose 0.8% mom in Jan, EU up 0.7% mom

                          Eurozone industrial production rose 0.8% mom in January, well above expectation of 0.2% mom. Production of durable consumer goods rose by 0.8% mom, non-durable consumer goods by 0.6% mom, energy and capital goods by 0.4% mom and intermediate goods by 0.3% mom.

                          EU industrial production rose 0.7% mom. Among Member States for which data are available, the highest increases were registered in Luxembourg (+3.8% mom), Greece and France (both +3.4% mom) and Belgium (+3.1% mom). The largest decreases were observed in Estonia and Latvia (both -1.5% mom), Portugal (-1.3%) and Spain (-0.7% mom).

                          Full release here.

                          UK GDP contracted -2.9% mom in Jan, as dragged by services

                            UK GDP contracted -2.90% mom in January, better than expectation of -4.9% mom. Services was the main drag, due to restrictions, and dropped -3.5% mom. Production sector dropped -1.5% mom, following eight consecutive month of growth. Construction saw 0.9% mom growth.

                            Overall GDP was -9% below the pre-pandemic level seen in February 2020. Services was down -10.2% from that level, production down -5.0%, manufacturing down -4.7%, construction down -2.6%.

                            Full release here.

                            Japan business conditions deteriorated sharply in Q1, no material improvement expected in Q2

                              According to the Ministry of Finance’s latest survey, business conditions in Japan deteriorated drastically in Q1. The Large manufacturing business survey index (BSI) tumbled from 21.6 to 1.6. Large non-manufacturing BSI turned negative from 6.7 to -7.4. Large all industries BSI also turned negative from 11.6 to -4.5.

                              Outlook is for Q2 is not expected to improve much, with large manufacturing, large non-manufacturing and large all industries at 2.5. Some improvements could be seen in Q3, with large manufacturing outlook at 9.3, but still way off Q4’s number. Large non-manufacturing Q3 outlook rose to 6.0. Large all industries Q3 outlook rose to 7.1.

                              Full release here.

                              New Zealand BNZ manufacturing dropped to 53.4, employment and new orders plunged

                                New Zealand BusinessNZ Performance of Manufacturing dropped sharply to 53.4 in February, down -4.6 pts from 58.0. Looking at some details, production dropped from 59.3 to 57.3. Employment dropped from 56.1 to 49.8. New orders tumbled from 62.8 to 56.2.

                                “Despite the PMI remaining in expansion, the proportion of those outlining negative comments stood at 54%, compared with 46% in January.  Given the second recent partial lockdown, it remains to be seen what impact this will have on the sector over the next few months,” said BusinessNZ’s executive director for manufacturing Catherine Beard.

                                BNZ Senior Economist, Craig Ebert said that “supply issues were to the fore from respondents’ comments to February’s PMI survey.  Of those citing negative factors, supply rather than demand problems dominated, with frequent references to supply chains, shipping, freight, costs, and difficulties in finding suitable staff.”

                                Full release here.

                                ECB Lagarde: Increase in market rates poses a risk to wider financing conditions

                                  In the post meeting press conference, ECB President Christine Lagarde acknowledged that ” market interest rates have increased since the start of the year, which poses a risk to wider financing conditions.”

                                  “Banks use risk-free interest rates and sovereign bond yields as key references for determining credit conditions,” she explained. “If sizeable and persistent, increases in these market interest rates, when left unchecked, could translate into a premature tightening of financing conditions for all sectors of the economy”.

                                  “This is undesirable at a time when preserving favourable financing conditions still remains necessary to reduce uncertainty and bolster confidence, thereby underpinning economic activity and safeguarding medium-term price stability.”

                                  In the baseline scenario of the new economic projections, Eurozone GDP growth is expected to be at 4.0% in 2021, 4.1% in 2022, and 2.1% in 2023. Outlook is “broadly unchanged” comparing to December projections. Risks over medium term “have become more balanced” even though downside risks remains in the near term.

                                  Annual inflation is projected to be at 1.5% in 2021, 1.2% in 2022, and 1.4% in 2023. The outlook for 2021 and 2022 was revised up, “largely due to temporary factors and higher energy price inflation.

                                  US initial jobless claims dropped to 712k, continuing claims down to 4.14m

                                    US initial jobless claims dropped -42k to 712k in the week ending March 6, better than expectation of 725k. Four-week moving average of initial claims dropped -34k to 759k.

                                    Continuing claims dropped -193k to 4144k in the week ending February 27. Four-week moving average of continuing claims dropped 103.5k to 4355.

                                    Full release here.

                                    ECB press conference live stream

                                      YouTube

                                      By loading the video, you agree to YouTube’s privacy policy.
                                      Learn more

                                      Load video

                                      Full introductory statement.

                                      ECB: PEPP to be conducted at significantly higher pace over the next quarter

                                        ECB said it expected the purchases under the pandemic emergency purchase programme (PEPP) to be conducted at a “significantly higher pace” over the next quarter. Though, the total envelop will be left unchanged at EUR 1850B, and the program will continue until at least end of March 2022.

                                        The Governing Council will purchase flexibly according to market conditions and with a view to “preventing a tightening of financing conditions”. The total envelop can be “recalibrated if required”,  to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.

                                        Main refinancing rate is kept at 0.00%. Marginal lending rate and deposit rate are held at 0.25% and -0.50% respectively. Interest are expected to “remain at their present or lower levels” until inflation outlook robustly converges to target within its horizon.

                                        Full statement here.

                                        Swiss government expects 3.0% GDP growth this year, 3.3% next

                                          Swiss Federal Government’s Expert Group said the country’s GDP is set to decrease in Q1. But following the easing of coronavirus measures, the economy should have a “rapid recovery” subsequently. Nevertheless, “uncertainty remains extremely high”.

                                          The Expert Group kept 2021 GDP growth expectation unchanged at 3.0%, adjusted for sporting events. That would be “above-average rate by historical standards”. Pre-crisis GDP level would be exceeded “by late 2021”. Unemployment rate is expected to fall gradually and reach an annual average of 3.3% for 2021, also unchanged.

                                          For 2022, the Expect Group predicts 3.3% GDP growth (revised up from 3.1%), with unemployment rate averaging 3.0%.

                                          Full release here.