The Commerce Department announced on Thursday that business inventories rose 0.5 percent m-o-m in February, following a revised 0.4 percent m-o-m advance in January (originally a 0.3 percent m-o-m increase).

That was in line with economists’ forecast for a 0.5 percent m-o-m gain.

According to the report, inventories at manufacturers rose by 0.8 percent m-o-m, while stocks at wholesalers increased by 0.6 percent m-o-m. At the same time, stocks at retailers were flat m-o-m.

In y-o-y terms, business inventories decreased 0.7 percent in February.

The report from the New York Federal Reserve showed on Thursday that manufacturing activity in the New York region expanded strongly in early April.

According to the survey, NY Fed Empire State manufacturing index climbed from 17.4 in March to 26.3 in April, pointing to the fastest growth in activity since October 2017.

Economists had expected the index to come in at 19.5.

Anything below zero signals contraction.

According to the report, the new orders index surged 17.8 points to 26.9, and the shipments index rose 3.9 points to 25.0, pointing to strong advances in orders and shipments. The delivery times index jumped 16.7 points to 28.1, pointing to the longest on record delivery times, and the inventories index went up 3.5 points to 11.6. The employment index increased 4.5 points to 13.9, indicating an ongoing rise in employment. On the price front, the prices paid index jumped 10.3 points to 74.7, its highest level since 2008, pointing to sharp input price increases, while the prices received index climbed 10.7 points to 34.9, a record high, indicating that selling prices grew at the quickest pace in more than twenty years.

The National Association of Homebuilders (NAHB) announced on Thursday its housing market index (HMI) rose 1 point to 83 in April from 82 in March. 

Economists had forecast the HMI to rise to 83.

A reading over 50 indicates more builders view conditions as good than poor.

Two of three HMI components recorded gains this month. The indicator gauging current sales conditions rose 1 point to 88 in April, and the component measuring traffic of prospective buyers increased 3 points to 75. Meanwhile, the measure charting sales expectations dropped 2 points to 81.

NAHB Chairman Chuck Fowke noted: “Despite strong buyer traffic, builders continue to face challenges to add much-needed housing supply to the market. The supply chain for residential construction is tight, particularly regarding the cost and availability of lumber, appliances, and other building materials. Though builders are seeking to keep home prices affordable in a market in need of more inventory, policymakers must find ways to increase the supply of building materials as the economy runs hot in 2021.”

Meanwhile, NAHB Chief Economist Robert Dietz said: “While mortgage interest rates have trended higher since February and home prices continue to outstrip inflation, housing demand appears to be unwavering for now as buyer traffic reached its highest level since November. NAHB’s forecast is for ongoing growth in single-family construction in 2021, albeit at a lower growth rate than realized in 2020.”

The Federal Reserve reported on Thursday the U.S. industrial production rose 1.4 percent m-o-m in March, following a revised 2.6 percent m-o-m decrease in February (originally a 2.2 percent m-o-m drop).

Economists had forecast industrial production would increase 2.8 percent m-o-m in March.

According to the report, manufacturing output rose 2.7 percent m-o-m in March and mining production surged 5.7 percent m-o-m. Meanwhile, the output of utilities plunged 11.4 percent m-o-m, as the demand for heating reduced because of a swing in temperatures from an unseasonably cold February to an unseasonably warm March.

Capacity utilization for the industrial sector increased 1.0 percentage point m-o-m to 74.4 percent in March. That was 1.3 percentage points below economists’ forecast and 5.2 percentage points below its long-run (1972-2020) average.

In y-o-y terms, the industrial output rose 1.0 percent in March, following a revised 4.8 percent plunge in the prior month (originally a 4.2 percent decline). This marked the first annual increase in industrial production since August 2019.

For the first quarter as a whole, total industrial production grew 2.5 percent y-o-y.

U.S. stock-index futures climbed on Thursday, as investors reacted positively to the macro data that pointed to an accelerating recovery of the U.S. economy, as well as strong Q1 earnings results.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

The Commerce Department reported on Thursday the sales at U.S. retailers surged 9.8 percent m-o-m in March, following a revised 2.7 percent m-o-m decline in February (originally a 3.0 percent m-o-m fall). This was the strongest monthly gain since May 2020.

Economists had expected total sales would jump 5.9 percent m-o-m in March.

According to the report, the largest advances in retail sales were recorded for sporting goods (+23.5 percent m-o-m), clothing (+18.3 percent m-o-m), food and beverage (13.4 percent m-o-m) and building materials (+12.1 percent m-o-m).

Excluding auto, retail sales climbed 8.4 percent m-o-m in March after a revised 2.5 percent m-o-m drop in the previous month (originally a 2.7 percent m-o-m decrease), being much better than economists’ forecast of a 5.2 percent m-o-m gain.

Meanwhile, closely watched core retail sales, which exclude automobiles, gasoline, building materials and food services, and are used in GDP calculations, jumped 6.9 percent m-o-m in March after a revised 3.4 percent m-o-m decrease in February (originally a 3.5 percent m-o-m decline). 

The data from the Labor Department revealed on Thursday the number of applications for unemployment decrease much more than expected last week, hitting its lowest level in more than a year. 

According to the report, the initial claims for unemployment benefits dropped by 193,000 to 576,000 for the week ended April 10. This was the lowest reading since March 2020.

Economists had expected 700,000 new claims last week.

Claims for the prior week were revised upwardly to 769,000 from the initial estimate of 744,000.

Meanwhile, the four-week moving average of jobless claims fell to 683,000 from an upwardly revised 730,250 in the previous week.

Continuing claims rose to 3,731,000 from a downwardly revised 3,727,000 in the previous week.

Citigroup (C) reported Q1 FY 2021 earnings of $3.62 per share (versus $1.05 per share in Q1 FY 2020), beating analysts’ consensus estimate of $2.18 per share.

The company’s quarterly revenues amounted to $19.300 bln (-6.9% y/y), beating analysts’ consensus estimate of $18.340 bln.

С rose to $75.01 (+2.88%) in pre-market trading.

USD weakened slightly against most of its major rivals in the European session on Thursday as fears that the Federal Reserve would increase interest rates sooner than expected to curtail accelerated inflation resulting from the U.S. recovery eased after repeated assurances from the Fed's policymakers. 

Benchmark 10-year note yields declined to 1.613% early Thursday, nearing their four-week lows of 1.61%.

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, edged down 0.05% to 91.65.

The Fed's Chair Jerome Powell told the Economic Club of Washington on Wednesday the U.S. was entering a period of faster growth and job creation but warned that coronavirus resurgence could derail the recovery. He also added that the Fed is likely to first reduce its monthly bond purchases after substantial progress on its goals on employment and inflation has been reached, then hold its balance sheet constant for a while, and then finally start to gradually increase interest rates.

Market participants are now awaiting two important data releases - the March retail sales and weekly jobless claims - that are due at 12:30 GMT.

FXStreet reports that S&P 500 has completed a bearish “reversal day” which is seen reinforcing the view the market is now at/near an “extreme” following a series of “red flags” and analysts at Credit Suisse remain alert to a consolidation/corrective phase, ideally from the 4200 neighborhood. 

“A small bearish ‘reversal day’” for the S&P 500 as the market shows tentative signs of acknowledging its ‘typical’ upside extreme condition (the index for example is now more than 15% above its 200-day average). With Volume/OnBalanceVolume not confirming the new highs we maintain our view we are getting close to a peak to this phase for the emergence of a consolidation/corrective phase."

“Support at 4118/14 holding can maintain an immediate upside bias for now still but with a break above 4152 needed to neutralize yesterday’s bearish session for a move to 4175/79 and ideally our 4200 Q2 objective. Our bias remains to look for more concerted signs of a top here.”

FXStreet reports that EUR/USD has reached the 1.1990/1.2014 pivot. A break above here is needed to dissipate downside pressure, in the view of Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank.

“EUR/USD has tested the more important 1.1990/1.2014 pivot. We will need to regain this latter level in order to cast attention back to the 1.2243 March high.”

“So far the rally remains just a correction higher and failure in the 1.1975-1.2014 band will keep attention on the downside.”

“Nearby support lies at 1.1835 then 1.1704/1.1695.”

FXStreet reports that the EUR/GBP pair maintains a base above 0.8643/65 as well as a bullish “reversal week” and analysts at Credit Suisse look for a deeper recovery to 0.8732 initially, then 0.8851/61.

“We stay biased higher and look for a move to 0.8732 next, then the 38.2% retracement at 0.8761.”

“Big picture, we would not rule out a move back to the ‘neckline’ to the medium-term top and 50% retracement at 0.8851/61, but with this expected to prove a much tougher barrier.” 

“Support moves to 0.8684 initially, then 0.8668 with 0.8640/39 ideally holding to maintain an immediate upside bias." 

• We'll not only be able to stop the economic slump this year but we can reverse it and regain our old strength next year

PepsiCo (PEP) reported Q1 FY 2021 earnings of $1.21 per share (versus $1.07 per share in Q1 FY 2020), beating analysts’ consensus estimate of $1.12 per share.

The company’s quarterly revenues amounted to $14.820 bln (+6.8% y/y), beating analysts’ consensus estimate of $14.544 bln.

PEP rose to $$142.90 (+0.56%) in pre-market trading.

FXStreet reports that according to economists at Westpac, a moderation in vaccinations and political tensions have weighed on GBP/USD but range support at 1.3670-00 has held with scope for range trading rebounds.

“GBP recent softness, notably versus EUR, coincided with a slide in vaccinations since Easter, partly due to a reduced vaccine supply from India while alternatives are yet to be approved. However, the rollout remains above prior targets and weekly vaccinations are still around 3M per week.” 

“Unrest in Northern Ireland over the post-Brexit trade deal may soon be resolved as renewed EU-UK talks progress. Additionally, Scottish (and local) elections on 6th May have raised concerns over whether a strong SNP outcome might trigger another ‘once in a lifetime’ Independence referendum. Disruptions to the national, not just the Scottish, economy would set back current recovery prospects and undermine GBP.” 

“As GBP softened, GBP/USD found solid support in the 1.3670-00 area.”

Bank of America (BAC) reported Q1 FY 2021 earnings of $0.86 per share (versus $0.40 per share in Q1 FY 2020), beating analysts’ consensus estimate of $0.62 per share.

The company’s quarterly revenues amounted to $22.800 bln (+0.1% y/y), beating analysts’ consensus estimate of $21.666 bln.

Bank of America also authorized the repurchase of up to $25 billion of common stock over time.

BAC rose to $40.50 (+1.55%) in pre-market trading.

FXStreet reports that EUR/CHF broke above 1.1023 on Wednesday and in the view of economists at Credit Suisse the pair increasingly looks as though it is trading in a potential bull “flag” continuation pattern.

“The market may actually be forming a larger bullish ‘flag’ continuation pattern and we, therefore, stay bullish. Next resistance is seen at 1.1064/67, then 1.1118/23, above which would confirm the pattern to suggest the broader bull trend is resuming, with scope for a move to the 1.1152/58 highs initially and eventually beyond.” 

UnitedHealth (UNH) reported Q1 FY 2021 earnings of $5.31 per share (versus $3.72 per share in Q1 FY 2020), beating analysts’ consensus estimate of $4.37 per share.

The company’s quarterly revenues amounted to $70.196 bln (+9.0% y/y), beating analysts’ consensus estimate of $69.129 bln.

The company also raised its FY 2021 EPS guidance to $18.10-18.60 from $17.75-18.25 previously versus analysts’ consensus estimate of $18.22.

UNH rose to $381.00 (+1.43%) in pre-market trading.

Reuters reports that leading economic institutes revised their joint growth forecast for Europe's largest economy and now expect that German economy shrank by 1.8% in the first quarter because of COVID-19 restrictions.

Economy Minister Peter Altmaier said he did not expect the economy to reach pre-pandemic levels before the end of the year. But he added that the industrial sector was getting through the crisis relatively well thanks to robust demand for abroad.

The institutes now expect gross domestic product to grow by 3.7% this year, down from their previous forecast of 4.7%. But the institutes raised their GDP estimate for 2022 to 3.9% from 2.7%, expecting household spending to rebound once coronavirus restrictions are lifted again.

The institutes estimate that COVID-19 restrictions have led households to save some 200 billion euros ($239.54 billion), Torsten Schmidt from the RWI institute said. That money is likely to boost overall economic growth once curbs are lifted, enabling consumers to start spending again during the summer.

FXStreet reports that Westpac discuss AUD/USD prospects.

“After last week trading the tightest weekly range since November, AUD/USD finally broke out on Wednesday and probably in the ‘right’ direction. A basket of Australia’s key commodity prices has been ticking higher, helping our short-term A$ fair value estimate to a 5-week high around 0.7850 mid-point.”

“Australia’s data continues to reinforce the case for upside. NAB March business conditions hit a record high, Westpac April consumer sentiment reached a 10 year high. With global risk appetite resilient and DXY price action unimpressive, AUD/USD should extend gains towards 0.7775, finding buyers around 0.7670/80.”

Reuters reports that job search website Adzuna said that online job adverts in Britain returned to pre-pandemic levels last week, boosted by pubs and restaurants looking for staff as they prepared to partially reopen.

Total online job ads hit 100% of their February 2020 average level on April 8, a rise of three percentage points from a week earlier, Adzuna said.

Hospitality and catering job ads rose by 10 percentage points to 58% of their February 2020 levels as restaurants, cafes and pubs prepared to reopen for outdoor customers on April 12, Adzuna said.

"We're not back to normal yet but these are really promising signs," Adzuna co-founder Andrew Hunter said. "There are still some hard yards to be fought and the big unknown is what will happen when the furlough scheme is wound down."

FXStreet reports that ANZ Bank said that the potential for difficult domestic politics amid Brexit uncertainty raises questions over sterling’s path in the medium term.

“We expect calm heads will prevail in the issues over the Northern Ireland issues and that politicians on all sides will work hard to resolve the situation. There must be a pragmatic solution to border checks. In Scotland, we must wait for the outcome of the 6 May elections. Despite looming large, a referendum on Scottish independence is unlikely in this UK Parliament, if only because it is not to Johnson’s advantage.”

“Both issues have the potential to temper positive sentiment towards sterling, and it will be important to monitor how they develop in coming weeks.”

According to the report from Istat, in March 2021 the rate of change of Italian consumer price index for the whole nation (NIC) was +0.3% on monthly basis and +0.8% on annual basis (from +0.6% in February), confirming the flash estimate.

The slight speed up of all-item index was mainly due to the trend reversal of prices of Non-regulated energy products (from -3.6% to +1.7%) and, to a lesser extent, to prices of services related to transport (from +1.0% to +2.2%).

Both core inflation (excluding energy and unprocessed food) and inflation excluding energy were +0.8% (down from +0.9% in the previous month).

The increase on monthly basis was mainly due to the prices of non-regulated energy products (+3.2%) and of services related to transport (+1.3%).

In March 2021 the rate of change of the Italian harmonized index of consumer prices (HICP) was +1.8% on monthly basis, mainly due to the end of the winter sales of clothing and footwear (not considered by NIC), and +0.6% on annual basis (from +1.0% in February).

FXStreet reports that Bart Melek, Head of Commodity Strategy at TD Securities, expects limited upside for the WTI as it is already trading at $63.

“Petroleum product demand strength amid a very robust US vaccination program, sharply lower-than-expected inventories along with recent demand projection increases by OPEC and the IEA have convinced traders that the pending OPEC+ production increases over the next three months will not prevent a tighter market environment this year.” 

“We expect only limited additional upside and range-bound trading over the next months, in line with our $63/b projection for Q2. Markets should not become overly tight, as OPEC, Russia and other key producers have plenty of crude to deploy to satisfy the pending demand recovery, thereby preventing crude from rocketing higher.”

Bloomberg reports that according to a person familiar with their latest outlook, Germany’s leading research institutes have cut their joint 2021 growth forecast for Europe’s biggest economy to 3.7% from 4.7%.

The twice-yearly outlook is prepared for the Economy Ministry by the DIW, Ifo, IfW, IWH and RWI institutes, and helps guide the government’s own forecasts and budget planning.

Germany’s economy likely shrank again in the first quarter due to restrictions introduced to stem the coronavirus. 

The Economy Ministry said this week that “the signs point to economic recovery” over the rest of this year. “The vaccination campaign, which is gaining momentum, and a strong global economy are fostering confidence,” the ministry said in its latest monthly report.

The government’s forecast is for growth of 3% this year, after a contraction of around 5% in 2020, and it expects a return to pre-pandemic levels in mid-2022.

FXStreet reports that Jane Foley, Senior FX Strategist at Rabobank, expects the kiwi’s rally to run out of steam, however, forecasts the pair at 0.72 on a six-month view.

“Despite caution on the outlook for growth, the RBNZ is expecting that supply chain disruption and oil prices effects will cause headline inflation to temporarily exceed 2% for a period. In tune with the message of various other G10 central banks, the RBNZ can be expected to look through this until the labour market shows sustained improvement.” 

“We expect the RBNZ to retain a cautious stance on policy for an extended period.”

“We see limited scope for follow through on Wednesday’s NZD/USD rally in the near-term. That said, we see NZD/USD at 0.72 on a 6-month view assuming further signs of economic recovery on that horizon.” 

During today's Asian trading, the US dollar was almost unchanged against the euro and the yen.

The ICE index, which tracks the dollar's performance against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), fell 0.04%.

The head of the US Federal Reserve, Jerome Powell, said on Wednesday that the regulator is likely to reduce asset purchases before raising interest rates.

The pound rose slightly against the US dollar and was almost unchanged against the euro. In the 1st quarter, the pound rose by 5% against the euro. This is the best quarterly growth in six years.

However, the pound began to weaken against the dollar and the euro as the effect of the confident start of vaccination in the UK decreased. The pound lost about 3% from its peak of $1.4235, which it reached in February.

The yield on ten-year UK government bonds has stabilized around 0.8% per annum after a sharp jump amid falling prices for government securities. At the beginning of the year, their yield was about 0.2%. Experts note that the further dynamics of the pound depends on whether the UK can continue to attract investment, which was a key factor in the recent strengthening.

According to the report from Insee, in March 2021, the Consumer Price Index (CPI) rose by 0.6% over one month, after being stable in February. The manufactured good prices rebounded sharply (+1.6% after –0.9%) due to the end of the winter sales. The food prices were stable after a decrease by 0.2% in the last month. The service prices (+0.1% after +0.2%) and those of energy (+2.2% after +2.5%) slowed down slightly.

Seasonally adjusted, consumer prices increased by 0.1%, after –0.1% in February.

Year on year, consumer prices rose by 1.1%, after +0.6% in February. The service prices accelerated (+1.1% after +0.8%) and those of energy rebounded considerably (+4.7% after –1.6%). The food prices rose slightly (+0.9% after +0.8%). The decrease in manufactured good prices softened in March (–0.2% after –0.4%). The tobacco prices slowed down (+5.8% after +12.8%).

Year on year, core inflation grew, in March, up to +0.8% after +0.6% in February. The Harmonised Index of Consumer Prices (HICP) rose by 0.7% over one month after being stable in the previous month; year on year, it increased by 1.4%, after +0.8% in February.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2091 (1377)

$1.2060 (3424)

$1.2036 (1724)

Price at time of writing this review: $1.1975

Support levels (open interest**, contracts):

$1.1900 (542)

$1.1867 (1746)

$1.1829 (1203)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date May, 7 is 49017 contracts (according to data from April, 14) with the maximum number of contracts with strike price $1,2000 (3424);

GBP/USD

$1.3916 (930)

$1.3888 (500)

$1.3864 (352)

Price at time of writing this review: $1.3779

Support levels (open interest**, contracts):

$1.3734 (668)

$1.3694 (360)

$1.3668 (1865)

Comments:

- Overall open interest on the CALL options with the expiration date May, 7 is 13070 contracts, with the maximum number of contracts with strike price $1,4200 (3731);

- Overall open interest on the PUT options with the expiration date May, 7 is 16166 contracts, with the maximum number of contracts with strike price $1,3700 (1900);

- The ratio of PUT/CALL was 1.24 versus 1.22 from the previous trading day according to data from April, 14

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

RTTNews reports that the Australian Bureau of Statistics said that the unemployment rate in Australia was a seasonally adjusted 5.6 percent in March. That was lower than expectations for 5.7 percent and down from 5.8 percent in February.

The Australian economy added 70,700 jobs last month to 13,077,600 - far surpassing forecasts for the addition of 35,000 jobs following the increase of 88,700 jobs in February.

Full-time employment saw a decline of 20,800 jobs to 8,874,200 people following the addition of 89,100 jobs a month earlier. Part-time employment surged by 91,500 to 4,203,400 people following the loss of 500 jobs in February.

The participation rate came in at 66.3 percent - again topping expectations for 66.1 percent, which would have been unchanged from the previous month. The rate decreased less than 0.1 percentage point for men to 70.9 percent and increased by 0.4 percentage points for women to 61.8 percent.

The underemployment rate decreased by 0.6 percentage points to 7.9 percent (0.9 percentage points lower than a year ago) and the underutilization rate fell 0.8 percentage points to 13.5 percent.

According to the report from the Federal Statistical Office (Destatis), the inflation rate in Germany, measured as the year-on-year change in the consumer price index, stood at +1.7% in March 2021. The inflation rate was positive for the third month in a row after the temporary reduction of the value added tax rates had ended, and it increased once again (February 2021: +1.3%). Destatis also reports that consumer prices rose by 0.5% compared with February 2021.

The prices of goods (total) rose by 1.9% from March 2020 to March 2021. Energy product prices were 4.8% higher than a year earlier. Following the +0.3% rise in February 2021, the year-on-year price increase accelerated markedly. Higher prices than in March 2020 were recorded especially for heating oil (+19.4%) and motor fuels (+12.7%) in March 2021. Natural gas prices also increased on a year earlier (+2.2%), and electricity prices remained nearly unchanged (0.1%). Food prices rose by 1.6%. Higher prices were recorded in particular for fruit and dairy products (+2.5% each). Marked price rises were also observed for tobacco products (+4.3%), although with a lower weight, while notable decreases were recorded, for instance, for mobile phones (-8.2%).

The marked year-on-year increase in energy product prices had an upward effect on the inflation rate. Excluding energy prices, the inflation rate would have been +1.4% in March 2021; excluding the prices of heating oil and motor fuels, it would have been only +1.3%.