The markets continue to behave inappropriately, which, of course, is a logical result of the ongoing panic. Nevertheless, periodically, there are signs that the market is trying to return to at least some semblance of normality but in places. For example, the growth of the pound in the first half of the day was largely due to just fundamental reasons. Whereas the growth of the single European currency lasting all day was caused solely by panic due to the coronavirus. Indeed, the number of people infected in the United States was 14,125 in 24 hours. When you see such terrifying numbers, you involuntarily think that the situation with the coronavirus in the United States may turn out to be worse than in Italy. This terribly scares and provokes a number of investors to withdraw part of the funds somewhere further away from North America. However, the oddity is that the pound was losing ground in the afternoon amid extremely good statistics in the United States while the single European currency continued to grow. As if there is no coronavirus for the pound, but there are only macroeconomic statistics, whereas there is only a coronavirus for a single European currency. So, yes, the markets have not yet returned to normal, and they continue to be in a feverish, which is accompanied by not quite adequate behavior.
So, initially, the pound largely grew due to data on inflation, which fell from 1.8% to 1.7%. At first glance, this seems strange. However, it should be taken into account that a decrease of up to 1.5% was predicted. In addition, the pound is still noticeably oversold, and any news, at least with some hint of a positive character, contributes to its growth. This is true only if the market is in a normal state, and not in a panic mode.
And the fact that the market is still panicking is clearly demonstrated by the single European currency, which could really grow only due to news about the pace of distribution of coronavirus in the United States. After all, the statistics in Europe were pretty disappointing. For example, IFO data showed a marked decrease in indices in Germany. Thus, the business climate index fell from 96.0 to 86.1. Meanwhile, the index of economic expectations literally collapsed from 93.1 to 79.7, while the index of current economic conditions decreased from 99.0 to 93.0. And it is clear that all indicators turned out to be worse than forecasts. The data itself is in the logic of recent business activity indexes, which simply collapsed. So the situation in the European economy, to put it mildly, causes slight concern. Nevertheless, there was some positive news in Europe. For instance, in France, the number of applications for unemployment benefits fell by as much as 31 thousand. And they expected a decrease of 16 thousand. Moreover, the number of applications for unemployment benefits in the Fourth Republic has been declining for the fourth month in a row. But, the data is only for February, and in March everything can change dramatically. However, Spain reported a slowdown in the growth of production orders from 3.1% to 1.7%. So the industry in Europe continues to be not in the best condition. Rather, there are signs of further deterioration.
Applications for unemployment benefits (France):
The US statistics turned out, frankly, very, very good. But this only affected the pound, then the single European currency continued to grow. So, the volume of orders for durable goods has not decreased by 0.7%, but increased by 1.2%. Moreover, the previous results were revised for the better, and in January, there was an increase of 0.1% instead of a decline of 0.2%. Consequently, orders for durable goods have been growing for three consecutive months. In addition, housing prices in the United States rose 0.3%, while they forecast growth of 0.2%. Thus, the decline in the pound is quite logical, but the growth of the single European currency rather suggests that the market has not yet returned to normal. Moreover, what is happening in the debt market is more likely to indicate that the first signs of the end of the process of mass exodus of capital from around the world to the United States are appearing. The fact is that if the yield on 5-year bonds decreased from 1.150% to 0.535%, that is, demand continues to be rushed, then the situation with 2-year bonds is different. Their profitability increased from 0.16% to 0.22%. Of course, it is too early to draw conclusions and say that the trend is changing. But the first signs appear that a reversal could really happen soon. Here, it is necessary to closely monitor the situation in the debt market.
Durable Goods Orders (United States):
Today, data on retail sales will be published in the UK, the growth rate of which may accelerate from 0.8% to 0.9%. And if we can recall yesterday, the pound responded adequately to macroeconomic statistics, then we can expect the pound to grow. At the same time, the meeting of the Board of the Bank of England today is clearly not interesting to anyone, since all decisions were taken during an emergency meeting. It is surprising that, following the example of the Federal Reserve System, this very meeting was not canceled at all.
Retail Sales (UK):
Here, the American statistics can literally blow up the market, and we will see a rapid rise in both the pound and the single European currency. Today, data on applications for unemployment benefits will be published. Data on initial applications should show the situation on March 21, that is, after the introduction of restrictive measures designed to curb the spread of coronavirus. These measures themselves consist in the fact that many people are transferred to remote work from home, and also restrict the work of various institutions where large groups of people can gather. So, judging by the forecasts, neither the United States Department of Labor, nor research institutes or analytical agencies have any illusions about American employers. It is expected that the number of initial applications for unemployment benefits will increase from 281 thousand to 1,090 thousand. Yes, you were not mistaken, we are talking about a figure of over a million. And this is in relation to initial applications. This number has never been. This will be another record set thanks to the coronavirus. And it is clear that against this background, no one will care at all about the number of repeated applications for unemployment benefits, which should increase from 1,701 thousand to 1,820 thousand. In addition, the final data on GDP for the fourth quarter are of little concern. Everyone already knows that the pace of economic growth accelerated from 2.1% to 2.3%. But this was after all at the end of last year, when there was still no coronavirus.
Number of Initial Jobless Claims (United States):
During the correctional movement, the euro / dollar currency pair managed to break through the maximum of the beginning of the week 1.0888, focusing in the region of 1.0900. It is likely to assume a fluctuation within 1.0880 / 1.0950, where in case of price fixing higher than 1.0950, a path will open for us in the direction of 1.1000-1.1030.
The pound/dollar currency pair is locally moving closer to the psychological level of 1.2000, where it felt a periodic ceiling above itself and, as a fact, rolled back towards 1.1660 with subsequent accumulation in the level of 1.1850. It is likely to assume that the quote will continue to show upward interest, where in case of price fixing higher than 1.1915, the path will open for us in the direction of the level of 1.1970-1.2000.