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Market Wrap
In February, the US ISM Manufacturing PMI rose by 1% point to 58.6. Compared with the last few months, this is a positive sign. The manufacturing sector expanded along with the overall economy, which achieved its 21st consecutive month of growth. Manufacturing PMI® indicators covering all five subindices were all in growth territory. Production and New Orders indicators were both solid.
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The US dollar index is rising as there will be a demand for the worlds reserve currency during uncertain times. The fact that the US economy appears to also be in a good place with jobs, inflation, manufacturing and GDP rising means other market participants will have increased confidence in converting their currency into the greenback.
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Oil has pushed higher and is at a potential level of resistance for WTI, though Brent futures indicate a move towards $116 is possible before meeting any potential sellers. Currently spot Brent is at $106 and 15% over the last week. Tomorrow is the OPEC+ decision and US crude oil inventories which could be market moving. In the lead-up to tomorrow’s meeting between the Organization of Petroleum Exporting Countries (OPEC) and its allies, Russian President Vladimir Putin spoke with leaders from other large energy producers, including the United Arab Emirates and Venezuela. At the same time, 31 of the IEA’s governing board members have agreed to release 60 million barrels of oil from their emergency reserves.
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Following the Ukrainian authorities claiming that a Russian missile hit a TV tower in Kiev, stock exchanges in the United States plunged. The alleged attack killed five people. Continuing hostilities and economic sanctions on Russia continue to add volatility to equity and commodity prices. As they intensified their assault on Kharkiv, Russia had warned Kyiv residents to flee. To gain a quick victory, Russian commanders have intensified the bombardment of Ukrainian cities. The Dow Jones Industrial Average is looking likely to head towards 32000 or below as the daily momentum builds to the downside pushing price action along.
The forex heatmap shows that the euro and pound are getting hammered whilst the yen and US dollar are seeing most of the flows. Commodity prices are going a lot higher, but the currency pairs associated due to being crossed with USD are mixed.
German inflation data out today shows an acceleration to 5.1% annually for the month of February. This is largely in line with expectations and may add pressure on the ECB to act sooner with regards to rate hikes. That being said, ECB members are also going to consider not ending the asset purchase programme while the Ukraine situation creates this much uncertainty for the markets.
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The USDCAD on the back of US dollar strength bounced from near the daily 200 EMA and 1. 2650 level. Canadian GDP expanded 1.6% in Q4 but month over month came in at 0% as expected.
