Daily Market Pulse

$1.9 trillion Covid-19 rescue package set to be signed


A lower-than-expected inflation (1.68% year-over-year vs. 1.7% forecasted) in the U.S. eased concerns about higher prices, driving both U.S. benchmark 10-year yields and the U.S. dollar to retreat while allowing shares to rebound once more. The Dollar Index, which tracks the U.S. dollar against a basket of major currencies, tumbled 0.15%. However, worries persist that the fresh $1.9 trillion Covid-19 “rescue” package set to be signed by U.S. President Joe Biden could overheat the economy. For today, the weekly U.S. jobless claims data, as well as the January’s JOLTS job openings data are due. Initial claims are set to decline for a second straight week, to 725k.


The pair EUR/USD gained 0.25% ahead of the European Central Bank policy meeting later on today.  Although no changes to interest rates or the schedule of bond purchases are expected, there are expectations that policymakers will talk about the recent rise in eurozone bond yields and, hence, the impact on the economic recovery in the bloc. Economic forecasts will be presented after the rate decision by President Christine Lagarde. Elsewhere, the European Health Agency is expected to issue a positive opinion about Johnson & Johnson's single-dose Covid-19 vaccine later today, after the EU has secured 200 million doses to arrive in the second quarter.


The U.S. Dollar’s recent rally may be running out of steam as the Sterling advanced for the third trading session in a row, on Wednesday. Markets have been pricing in that Britain’s economy will be one of the first major developed economies to recover from the Covid-19 pandemic. The U.K. economy has begun to gradually reopen from a strict third national lockdown. Looking ahead, investors and traders will assess the RICS Housing Price Balance report, which was released earlier today. The net balance of surveyors reporting that house prices have risen over the last three months increased to +52 in February, from +49 in January, above the consensus, +45. Meantime, the European Central Bank policy meeting will also drive attention.


The Japanese Yen strengthened (+0.1%) on Wednesday, erasing some previous losses as the U.S. dollar languished near one-week lows. A report on U.S. consumer prices calmed concerns about inflation and led the U.S. benchmark 10-year yields to end the day around 4bps lower yesterday. Looking ahead, it is a quiet day on the economic calendar, with Japanese traders waiting for the BSI Large Manufacturing Conditions (Q1), which is not expected to be a market driver.


Once more, the Loonie showed some gains over its rival U.S. dollar during a choppy trading session on Wednesday. The CAD rose 0.2% on the back of higher oil prices after the Bank of Canada (BoC) revised to positive its outlook for GDP growth in the first quarter. The BoC also ratified that the economy was proving more resilient to a second wave of Covid-19 than expected. Wrapping the policy meeting up, it left its benchmark interest rate unchanged at a record low of 0.25%. Looking ahead, Lawrence Schembri, Deputy Governor of the Bank of Canada, will hold a press conference to Restaurants Canada.


The Mexican peso printed strong gains (+1.60%) against the U.S. dollar on Wednesday after oil prices rose on an upbeat forecast for global economic recovery. Crude oil prices rose 0.67% to $64.44/barrel as vaccine rollouts bolstered the economic outlook, although gains were capped by a surge in crude oil inventories after last month’s Texas storm. In general, the political risk is still weighing on the MXN, with the approval of an electricity bill that gives priority to state-owned utility power over private companies. On the other hand, the country's relatively high-interest rates compared to its EM peers, provide some support to the MXN.


The Chinese yuan was flat against the greenback on Wednesday after the hot U.S. inflation numbers didn't materialize. Today, market participants will digest the recent money supply numbers for February, which is a vital leading indicator for GDP and commodities. The narrow measure of the money supply (M1), which covers cash in circulation plus corporate demand deposits, plunged to 7.4% year-over-year, from 14.7% in January, while M2, a broad measure of money supply covering cash in circulation and all deposits, jumped back to 10.1%, from 9.4% in January. On the Sino-U.S. relations front, U.S. Secretary of State Antony Blinken will meet with top Chinese officials on March 18 in Alaska. This will be the first high-level in-person contact between the two countries under the Biden administration.


The Brazilian Real jumped 2.23% against the U.S. dollar in Wednesday’s choppy trading session. The BRL recovered some ground after the lower house of Congress approved the emergency Covid-19 bill, with a second and final vote scheduled for later today. The core text not only makes it possible to resume the direct payments to low-income people but also has a mechanism in case of non-compliance with the public spending ceiling. Meanwhile, data on Wednesday showed services activity in Brazil kicked off the year with a surprisingly strong rise in January. However, the Covid-19 pandemic seems uncontrolled in the country. Brazil registered a daily increase of 2,349 deaths (1,954 on the previous day) and 80,955 confirmed cases (from 69,537). Looking ahead, market participants will wait for Consumer Price Index inflation for February.


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