The better-than-expected NFP brought liquidity to the market while the global Bond Yields Continue to Push Higher with the expectation of an unwinding stimulus program, so Can Strong NFP Push USD Higher? Also, both BoE, BoC, and ECB will speak about their economic condition. So get more insights for the new trading week with AtoZ Markets’ Forex Weekly Fundamental Forecast.
March 07, 2021 | AtoZ Markets – The fundamental releases of the previous week were above the expectation that increased the tension regarding how Fed will unwind its extraordinary stimulus program.
The ISM Manufacturing Survey increased by 2.1 points while the new order series was above 3.7 points to 64.8, which is the highest since 2008. So Can Strong NFP Push USD Higher?
AtoZ Markets team has highlighted below the main drivers in our Forex Weekly Fundamental Forecast.
Forex Weekly Fundamental Outlook
There are several important releases from most of the major countries. The Bank of England will speak along with the Bank of Canada and the European Central Bank. On the other hand, investors will see Canadian unemployment data with the ECB Interest rate decision.
Last week investors have seen the January retail sales data for the Eurozone. The year over a year Eurozone retail sales came at 6.4 % in January, missing the expectation of a decline of 1.2%.
However, on a month over month basis, the data was bad. The monthly details come at 5.9 % compared to the estimate of a decline of 1.4 %.
Over the winter, the European economy experienced the Covid-19 outbreak, where there was a strong lockdown at least April. The lockdown brought a negative impact on consumer spending, affecting the Eurozone GDP in the early part of 2021.
With the worse than expected retail sales data, the Eurozone GDP might come lower than the expectation following the effect of the Covid-19 epidemic.
On the other hand, the Eurozone economy is facing a strong rise in global bond yields, complicating the fundamental Outlook. As a result, ECB policymakers might provide a mixed sentiment for the economic forecast while any dovish tone would be negative for Euro, and as a result, EURUSD may move down.
On the USD front, The Consumer Price Index would be the main investors’ focus. During January 2021, the headline CPI was increased by 0.3 % month over month and 1.4 % year-over-year. However, the monthly increase was flattered due to the rising energy prices, which helped the gasoline prices were increased by 7.4 %.
This week, the headline CPI may increase by 0.4% for February, in line with the expectation. Energy price is increasing that may take a month or two to send it skyrocketing in many countries.
Overall, the better than expected CPI along with the dovish ECB would bring an impulsive bearish pressure for the EURUSD.
This week the Bank of Canada will assess the monitor policy statement. Bank of Canada policymakers’ current view is to make notable changes to the monetary policy, especially to the policy rates for asset purchase programs.
Investors will focus on the policymaker’s view on the stronger Canadian Dollar, the rising oil prices, and the recent surge in government bond yields.
Earlier, the Bank of Canada mentioned that a strong economy would contribute to the slower economic recovery. However, the current rising in the oil price would be considered.
Overall, investors should focus on whether the policymaker comment on the rising Bond yields and their effect on the economic recovery. Any hints of quantitative easing would sit back the current bullish pressure in the Canadian Dollar. In that case, the USDCAD may move higher despite the strength in the bond yield.
So considering the US Dollar, Can Strong NFP Push USD Higher? If it does we may expect volatility in the USDCAD Price.
The UK manufacturing sector remains in the limelight despite the lockdown restriction. Therefore, it put the UK economy at a halt for a particular time. Since the end of the lockdown, the UK economy showed consistent growth over the time expected to falter in January.
On the other hand, the 1.2% gain in December monthly GDP may provide a sobering affair with the expectation of tightening measure at the beginning of the month.
The Bank of England estimated a 4% contraction for Q1, the modest non-residential retail that may not expect to return until April 12, 2021. Currently, the service index faced a 1.7% rise in December that may reverse in January.
Despite the strength of the US Dollar, Bitcoin remained strong with institutional traders’ support to hedge against the eventual inflation. Moreover, the Fed failed to halt the rising treasury yield that may provide additional positive news for Bitcoin bulls. In that case, investors should focus on how the US economy reports the fundamental releases where any weakness would be a bullish sign for Bitcoin.
The bullish pressure in Bitcoin came with a strong volume, pointing to more buyers and sellers’ activity. In recent weeks, the trading volume for eight major exchanged came at $10 billion for the second consecutive day.
Ethereum networks have seen a strong hash rate despite the bearish pressure. Moreover, there was the highest number of daily transactions recorded in February 2021.
According to some analysts, Ethereum has moved more than 400% without any significant retracement that may cause a strong bearish pressure in the price. On the other hand, the recent development of Ethereum 2.0 can process multiple layers of implementation is a positive sign of ETH. The Ethereum 2.0 would perform thousands of transactions per day, even hundreds of thousands of transactions at a time.
Like other cryptocurrency markets, Litecoin recorded trending price movements in recent days. The price moved above $236 in recent days, while in September 2020, the price was as low as $43. Moreover, Litecoin has increased volatility from late 2020 with larger price swings in the intraday ranges. The cryptocurrency instrument made a 35% loss that becomes a very risky instrument to trade as it became difficult to set the stop loss low.
The large fall was initiated by the high price levels attained in such a short time span. Extremely bullish prices often lose steam and fall back after cautious investors close their positions and secure gains like the stock market. These practices are used by most institutional investors to enter the cryptocurrency market.
Caterpillar showed a weaker than expected earnings report recently where earnings were down by 36% to 3.42 a share.
However, in Q4 2020, the operational performance was very strong, and the profit per share came at $1.42 per share. The full-year operational margin was at 10.9%, with a $3.4 billion shareholders returned in 2020.
However, the recent Dollar strength and US Non Farm Payroll report might provide a short-term bearish pressure in the US Stock market, and we may see a bearish correction in stocks like Caterpillar.
Netflix showed growth in online subscribers during the last few years. The company started to focus on local languages in their content that may catch more users.
During the December 2020 quarter, Netflix added 8.5 million subscribers with earnings per share at $1.19 on $6.64 billion sales. Overall, Netflix beat the Wall Street expectation that made investors believe that its stock may move higher the following week.
Moreover, the recent bullish daily close is enough to say that the price has a higher possibility to continue the bullish momentum as long as it is trading above the $487.22 level.
Morgan Stanley [MS]
Morgan Stanley showed a better thane expected revenue at $13.64 billion in the Q4 of 2020, while the EPS came at $1.81. Furthermore, the investor revenue cane 46% higher to $2.3 billion.
The fixed-income revenue showed a better result with 30% above the previous result, and the equity revenue came at $2.5 billion, 30% above the expectation.
Morgan Stanley is one of the banking stocks that faced strong bullish pressure due to the COVID-19 stimulus program. Therefore, the recent declaration of the stimulus program might provide further bullish pressure in this stock with the target of $85.00
Overall, the better-than-expected US Non Farm Payroll report may keep the US Dollar strong against the other major currencies. However, this week has more releases from other central banks that may keep the market volatile.
Can Strong NFP Push USD Higher? Let us know in the comments section below.