Gold Extends Rally, Oil Rises, Euro Consolidates

Market overviews

Overall market sentiment is steady today. Major European indexes are trading slightly in black, together with US futures. WTI oil rebounds on news that US President Joe Biden is set to announce ban of Russian oil imports as soon as today. Gold is extending recent rise after brief consolidation, with aim to have a test on record high. In the markets, Euro is continuing to recover, digesting recent losses. Dollar is also firm, except versus Euro and Kiwi. On the other hand, Aussie is in deep pull back while Yen also turns softer.

Technically, Gold is back above 2000 handle it’s on track to retest 2074.84 high made in 2020. Decisive break there will resume long term up trend. In any case, further rise is expected as long as 1960.83 support holds. At the same time, we’ll keep an eye on when WTI crude oil would break through 131.82 temporary top, to extend recent powerful rally towards 147 record high too.

In Europe, at the time of writing, FTSE is up 0.04%. DAX is up 0.50%. CAC is up 0.43%. Germany 10-year yield is up 0.1307 at 0.115. Earlier in Asia, Nikkei dropped -1.71%. Hong Kong HSI dropped -1.39%. China Shanghai SSE dropped -2.35%. Singapore Strait Times dropped -1.22%. Japan 10-year JGB yield rose 0.0082 to 0.155.

US goods and services trade services widened to USD 89.7B

US exports of goods and services dropped USD 3.9B to USD 224.4B in January. Imports rose USD 3.8B to USD 314.1B. Trade deficit widened to USD 89.7B, versus expectation of USD 85.7B.

The January increase in the goods and services deficit reflected an increase in the goods deficit of USD 7.1B to USD 108.9B and a decrease in the services surplus of USD 0.6B to USD 19.2B.

Year-over-year, the goods and services deficit increased USD 24.6 B, or 37.7%, from January 2021. Exports increased USD 29.9 B or 15.4%. Imports increased USD 54.4B or 21.0 %.

Eurozone Q4 GDP growth finalized at 0.3% qoq, EU at 0.5% qoq

Eurozone Q4 GDP growth was finalized at 0.3% qoq while employment grew 0.5% qoq. For 2021 as a whole, GDP grew 5.3%. GDP was 0.2% above pre-pandemic level in Q4 2019.

EU Q4 GDP growth was finalized at 0.4% qoq while employment grew 0.5% qoq. For 2021 as a whole, GDP grew 5.3%. GDP was 0.6% above pre-pandemic level in Q4 2019.

GDP growth by Member State: Slovenia (+5.4%) recorded the highest increase of GDP compared to the previous quarter, followed by Malta (+2.3%), Spain and Hungary (both +2.0%). Decreases were observed in Ireland (-5.4%), Austria (-1.5%), Germany (-0.3%), Croatia, Latvia and Romania (all -0.1%).

Also released, Germany industrial production rose 2.7% mom in January, above expectation of 0.5% mom. Italy retail sales dropped -0.5% mom in January, versus expectation of 1.1% mom.

BoJ Kuroda: Inappropriate to scale back stimulus while wage growth remains low

BoJ Governor Haruhiko Kuroda told the parliament today that inflation expectations and wages growth in Japan are still low. Even if inflation exceeds the 2% target, “it’s inappropriate to deal with by scaling back stimulus or tightening monetary policy,” he said.

“If crude oil and commodity prices drive up inflation while wage growth remains slow, that would hit households’ real income and corporate profits, and hurt the economy,” he said. “Such conditions won’t lead to sustainable achievement of 2% inflation.”

Regarding global sanctions on Russia, Kuroda said, “the rouble and Russian government bond prices are falling sharply. We can’t rule out the possibility debt payment from Russia could be disrupted. The chance of Russia defaulting on its debt cannot be ruled out”.

Japan bank lending grew 0.4% yoy in Feb, slowest since 2012

Japan bank lending grew 0.4% yoy in February, below expectation of 0.6% yoy. That’s the slowest rate since May 2012. Lending by major banks dropped -1.3% yoy, biggest decline since August 2021. Regional banks’ lending rose 1.7% yoy, smallest increase in more than a decade.

“We must keep an eye out on how developments in Ukraine could affect corporate funding through rising crude oil prices,” a BOJ official told a briefing.

Also released, labor cash earnings rose 0.9% yoy in January, above expectation of 0.2% yoy. Current account surplus narrowed to JPY 0.19T in January, below expectation of JPY 0.33T.

Australia NAB business confidence rose to 13, getting back on track

Australia NAB business confidence rose from 4 to 13 in February. Business conditions rose from 2 to 9. Looking at some details, trading conditions rose from 8 to 10. Profitability condition rose from 2 to 5. Employment condition rose from -1 to 8.

“Overall, the February survey shows that the economy is quickly getting back on track as the Omicron wave recedes,” said said NAB Group Chief Economist Alan Oster. “The outlook is fairly strong with supply disruptions and cost pressures now the major challenge facing businesses.”

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0795; (P) 1.0864; (R1) 1.0921; More…

EUR/USD is staying in consolidation form 1.0805 temporary and intraday bias remains neutral. Stronger recovery cannot be ruled out. But upside should be limited by 1.1120 support turned resistance to bring down trend resumption. On the downside, firm break of 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786 will pave they way to 100% projection at 1.0349 next.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1494 resistance holds. Firm break of 1.0635 (2020 low) will raise the chance of long term down trend resumption and target a retest on 1.0339 (2017 low) next. Nevertheless, break of 1.1494 will maintain medium term neutral outlook, and extend range trading first.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:30 JPY Labor Cash Earnings Y/Y Jan 0.90% 0.20% -0.20% -0.40%
23:50 JPY Bank Lending Y/Y Feb 0.40% 0.60% 0.60% 0.50%
23:50 JPY Current Account (JPY) Jan 0.19T 0.33T 0.79T 0.81T
00:01 GBP BRC Like-For-Like Retail Sales Y/Y Feb 2.70% 4.70% 8.10%
00:30 AUD NAB Business Confidence Feb 13 3 4
00:30 AUD NAB Business Conditions Feb 9 3
05:00 JPY Leading Economic Index Jan P 103.7 104.5 104.8
06:00 JPY Eco Watchers Survey: Current Feb 37.7 38.1 37.9
07:00 EUR Germany Industrial Production M/M Jan 2.70% 0.50% -0.30% 1.10%
09:00 EUR Italy Retail Sales M/M Jan -0.50% 1.10% 0.90% 0.80%
10:00 EUR Eurozone GDP Q/Q Q4 F 0.30% 0.30% 0.30%
10:00 EUR Eurozone Employment Change Q/Q Q4 F 0.50% 0.50% 0.50%
11:00 USD NFIB Business Optimism Index (CAD) Feb 95.7 97.5 97.1
13:30 CAD International Merchandise Trade Jan 2.62B -87.5B -0.1B -1.58B
13:30 USD Trade Balance (USD) Jan -89.7B -87.5B -80.7B -82B
15:00 USD Wholesale Inventories Jan 0.80% 0.80%