On Monday, the foreign exchange market lost Friday’s synchronicity. If the European currencies were decreasing against the dollar, commodities were growing. Nevertheless, the dollar index was close to the daily moving average SMA 100 at 91.30. The market is keeping a close eye on this mark, as in the case of fixing the indicator above, there will be a signal to the market reversal.
The dollar continues to be supported by a fundamental background. There was data from the ISM manufacturing sector that gave rise to positive expectations for the labor market. The business activity index increased to 60.8 in February from 58.7 in January, exceeding market expectations of 58.8. The indicators point to the strongest growth in production activity since February 2018. New orders rose to 64.8 from 61.1 a month earlier. The employment index increased to 54.4 against 52.6, and the new export orders showed 57.2 against 54.9.
Supplies remain a problem in the sector. This indicator rose to 72 against 68.2. The price pressure also increased: 86 against 82.1, which is the highest indicator since July 2008. According to ISM Chairman Timothy R. Fiore, problems due to work constraints, short-term breaks for disinfection of facilities, and difficulties in hiring workers continue to cause tensions that limit the growth potential of production.
The market positively reacted to the data. American treasuries yield increased slightly and stabilized at about 1.43%. In Australia, bond yields rose after the central bank left its asset purchase plan unchanged. The stock market has increased slightly, although trading was varying. The Dow Jones and S&P 500 added about 2%. But in the Asian session, there is a decline again.
Investors continue to argue about whether the government and central bank stimulus is excessive. The possibility of accelerating inflation as the global economy recovers has raised fears that monetary policy may need to be tightened sooner than expected. This has led to the rising of sovereign bond yields this year and stopping the bullish rally on stock exchanges.
Main market quotes:
- S&P 500 (F) 3,881.50 -17.25 (-0.44%)
- Dow Jones 31,535.51 +603.14 (+1.95%)
- DAX 14,025.82 +13.00 (+0.09%)
- FTSE 100 6,610.75 +22.22 (+0.34%)
- USD Index 91.260 +0.224 (+0.25%)
Important events:
- RBA Interest Rate Decision (Mar) at 02:30 (GMT+2);
- Germany Unemployment Change (Feb) at 10:55 (GMT+2);
- Eurozone CPI (y/y) (Feb) at 09:00 (GMT+2);
- Canadian GDP (q/q) at 15:30 (GMT+2);
- FOMC Member Brainard Speech at 20:00 (GMT+2).
