After the dovish Fed, European PMIs are in Focus for this week. Moreover, the Feds statement, SNB Monetary Policy Assessment, and Euro Summit may inject liquidity in the market. Get more insights for the new trading week with AtoZ Markets’ Forex Weekly Fundamental Forecast.
March 21, 2021, | AtoZ Markets– It was a busy week with many economic events and central bank announcements. The Federal Reserve provided a dovish tone with weaker than expected February retail sales. Bank of England provided no change in the cash rate while the Swedish inflation slows down.
So what for this week?
Investors will focus on Eurozone PMIs, where the Fench and German PMIs will be the leading investor’s attraction. Moreover, there are- Fed Chair Powell’s testimony and the Eurozone summit, among other important events. However, from this week’s event, European PMIs Are in Focus.
AtoZ Markets team has highlighted below the main drivers in our Forex Weekly Fundamental Forecast.
Forex Weekly Outlook- European PMIs Are in Focus
We may see some decent movement in European pairs during the PMI release. Moreover, the current uncertainty about the COVID-19 pandemic 3rd wave may influence the financial market adversely.
So let’s start the Forex Weekly Fundamental Outlook with the EURUSD:
The Eurozone remained resilient until the end of 2020, where the softness was followed by a slow economic recovery this year. The economic growth was down by 0.7% QoQ in quarter 4. Moreover, the recent financial report suggests a further decline in the Eurozone GDP during Q1.
With mixed data, the retail sales showed a better thane expected report of 5.9% growth in January, the most significant decline since April 2020. However, the industrial output showed an increase of 0.8% month over month in January.
However, this week, European PMIs are in Focus that may indicate the Q1 GDP. Until now, the PMI remains consistent with a contraction in the Eurozone Economy. However, investors should focus on whether the PMI will be above the 50 levels or not. A better than expected PMI report may create an immediate bullish impact on the EURUSD Pair.
UK inflation edged up to 0.7% in January while the CPIH moved by 0.9%. The main reason behind the increase in CPI was the price increase in furniture and household goods. Currently, BoE highlighted that the CPI is below the 2% target rate. Moreover, it may move above the 2% rate due to the recent increase in energy price.
Investors will see February retail sales this week that moved down during the COVID-19 pandemic. The January retail sales plunged 8.2%, with sales of 5.9% a year ago.
Meanwhile, the Confederation of British Industry retailers’ survey pointed an increase in retail sales above 2.1%, month over month. Therefore, if this week’s report shows a better than expected report, we may see a bullish pressure in the GBPUSD pair.
This week, the Central Bank of Mexico will set to announce its policy. However, before the policy announcement, Central Bank Governor indicated that the US Stimulus and the rising treasury yield might influence some market adjustments.
In February, the Mexican inflation remained above the Central Banks target point due to the rising fuel prices. The fuel price increased by 3.76%, while inflation edged higher. In the last meeting, Banxico lowered the overnight rate by 25 bps to 4.00% that surprised the market. Therefore, there is a possibility of an additional rate cut by 25 bp this week. In that case, the USDMXN may face immediate bullish pressure until it settles below the 20.00 level.
Bitcoin price soared above the $60,000 level last week but failed to have a weekly close above it. The main reason behind the bearish movement was the massive sell-off due to profit-taking by institutional traders.
There were almost 184350 trades with a value of $2.2 Billion in a single day. Among cryptocurrency exchangers, Huobi Exchange has seen the biggest liquidation order of $18.94 million.
Currently, Bitcoin may get liquidity from the stimulus program. According to some prominent analysts/, Bitcoin may get 40% of the stimulus money’s investment. Therefore, Btc may add a further 1.2% value to its market value.
Overall, investors should wait for uncertainty, and any report of uncertainty would create a bullish impact on Bitcoin.
According to some prominent analysts, Ethereum 2.0 PoS may provide more security than Bitcoin.
Bitcoin, Proof- of work algorithm requires miners to solve complex calculations to unlock new Bitcoins within the network. This process has been criticized for being energy-intensive. Therefore, investors focus on a solid alternative with a massive speed and lower cost, obviously with maximum security.
Ethereum 2.0 started the last layer where the July update will see some tokens to be destroyed. Therefore, investors would send some fees to the network instead of miners.
Overall, Ethereym becomes more than money, and investors from many countries are adopting it. The strong space in the Defi sector may increase buyers in Ehtherum. As a result, ETH prices may surge higher with short-term fundamental events.
Litecoin’s active address numbers have grown to six times higher in the last year, according to some crypto analysts. The numbers of new Litecoin addresses have grown to 100,000, which is 5 times higher than the last 12 months.
The growth in the number of wallets comes with price growth. According to CoinGecko, Litecoin made over $13 billion trades while the circulating supply was 66 million. The significant increase is pointing to strong market stability, which potential for LTC buyers.
However, if we look at the recent price action, we would see a neutral market momentum. Therefore, the choppy price action may increase the current bearish correction from where a strong bullish movement may appear.
Microsoft provided better than expected fiscal 2nd quarter results in January, pointing another chapter to its long-running success. Currently, Microsoft is expanding its business globally by implementing cloud computing and enterprise IT spending. As a result, investors may see an additional bullish leg in Microsoft stocks in the coming weeks.
If we look at the liquidity, Microsoft holds $132 billion cash and cash equivalents where the free cash flow is at $50.4 billion over the last 12 months. Moreover, the debt to equity ratio is stilled strong with $60.5 billion total debts. Microsoft is an ideal company in terms of credit rating, and investors with such companies expect growth in stocks.
Despite the debt level, no other companies achieved the AAA credit rating, including Apple. Microsoft is a financially stable company since 1980 and has the ability to pay off its debt with the existing cash.
Facebook showed a better-than-expected earnings report in Q4 where the EPS came at $3.88 a share. The EPS at 52% above the previous report while the revenue came at 33% higher to $28.1 billion.
However, the daily user activity was down in the US and Canada. The strongest daily user activity was during the COVID-19 pandemic where people were mostly at home due to the lockdown.
In the broader view, more than 10 million businesses use social media sites to connect with customers. Currently, Facebook has 1.845 million daily active users, up from 1.82 million in the previous quarter.
Based on the present market condition, investors should wait for what price action says at the $300 area, from where we may see some bearish pressure.
Apple showed a quarterly revenue of 24% up from the previous quarter in December 2020. However, the current concern about the Apple stock is how the antitrust scrutiny in the US and Europe put an impact on the Apple business. Moreover, according to the recent news, European Union is also focusing on initiating an antitrust charge against Apple.
In the latest quarter, Apple showed a better than expected earnings release with $1.86 per share with sales of $111.44 billion. Among sales, Computer sales were 21% above the expectation at $8.7 billion. The recent launch of the M1 chip influenced users to upgrade their laptops. Moreover, due to the pandemic people remained at home that also influenced laptop usage.
However, based on the current market structure, investors may see a bearish correction in the Apple stock. The Apple management did not provide any guidance about the March 2021 update that may influence the correction.
Overall, European PMIs are in focus for this week while investors may see a direction from the Fed. Overall, a better than expected Eurozone PMI (above the 50 levels) would create a bullish impact on the EURUSD.
What do you expect from the European PMIs? Let us know in the comments section below.