The Federal Reserve Bank of Dallas reported Monday its general business activity index for manufacturing in Texas rose to 28.9 in March from an unrevised 17.2 in February, pointing to expansion in Texas factory activity for the eighth straight month. This was the highest reading since August 2018 as well.

According to the report, the production index, a key measure of state manufacturing conditions, came in at 48.0 in March, up 28.1 points from February, indicating a record output growth. The new orders index jumped 17.5 points to 30.5, and the growth rate of orders index increased 11.1 points to 22.7. The shipments index surged 17.0 points to 33.1, while the capacity utilization index climbed 29.6 points to 46.1, its all-time high. Elsewhere, the employment index rose 6.1 points to 18.8, suggesting robust hiring. 

eFXdata reports that FX strategists at Citi are tactically neutral on USD this week amid the flows of month, quarter, and fiscal year-end.

"Month, quarter, and fiscal year-end will inevitably introduce further distortion to price action, while signals remain mixed across asset classes. We also have a number of notable events, including an infrastructure announcement from Biden on Thursday and NFP on Friday, which leaves CitiFX Strategy tactically neutral here". 

"We expect a bid bias in the USD, given broader risk dynamics. US equity futures and yields are all heading lower, while oil prices are down almost 2%. With very little on the calendar, FX markets will continue to take its cue from broader market sentiment. Note that USD/CNH is testing key resistance again, while resistance has held in USD/JPY". 

• It’s been a completely unprecedented economic downturn
• We need fast growth to close the gap versus the pre-pandemic path of the economy
• Inflation should not be seen as one-off price increases, but sustained pressure
• Bank rate should not be linked to short-term growth in the economy

The ship is currently on its way to Great Bitter Lake, according to Leth Agencies, which is a transit agent at the Suez Canal. Once there, it will undergo a technical inspection.

Before the bell: S&P futures -0.52%, NASDAQ futures -0.36%

U.S. stock-index futures fell on Monday, as bank stocks came under pressure on concerns over possible spillover effects of last week’s default on margin calls of U.S.-based hedge fund.

Global Stocks:

• We remain on track to deliver the roadmap on easing lockdown

FXStreet reports that according to Axel Rudolph, Senior FICC Technical Analyst at Commerzbank, the EUR/PLN pair has overcome the 2009/2021 resistance line and 2020 peak at 4.6359/4.6460, which is bullish.

“EUR/PLN’s advance has now taken it above the 2009-2021 resistance line at 4.6359 and also the October high at 4.6460 which is bullish. Having said that, only a rise above the 4.6460 October peak on a daily chart closing basis would put the 2004 and 2009 highs at 4.9302/4.9422 back on the cards.” 

“Upside pressure should retain the upper hand while the March 23 low at 4.5888 underpins on a daily chart closing basis. Below it the late January high can be seen at 4.5637 and the mid-January high at 4.5544.” 

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

Dow (DOW) resumed with a Neutral at Credit Suisse; target $50

Facebook (FB) target raised to $385 from $355 at Deutsche Bank

Credit Suisse (CS) downgraded to Neutral from Buy at BofA Securities

Twitter (TWTR) upgraded to Buy from Hold at Truist; target raised to $74

FXStreet notes that silver (XAG/USD) stays trapped in a turgid and choppy range, holding below the 50% retracement of the 2011/2020 bear market at $30.72. Although the precious metal maintains a long-term base, analysts at Credit Suisse still expect the core uptrend to eventually resume.

“With a long-term base still in place though our base remains to view this a correction within a broader uptrend still, even if consolidation may still last for quite some time yet.” 

“Above $30.72 remains needed to suggest the core uptrend has indeed resumed for a move to our core objective still at $35.23/35.365 – the 61.8% retracement and key high from October 2012.”

“Support is seen at $24.05 initially, then more importantly at $22.26/21.68, which we look to continue to hold.

But it will increase its 2022 GDP growth forecast from 3.8% to 4.3%.

Forecasts do not include the impact on the economy of the stimulus package that is to be announced in April.

EUR fell against its major counterparts in the European session on Monday as an imposition of new coronavirus curbs to stem the latest wave of infections across the EU and a slower-than-expected pace of vaccinations darkened a short-term outlook for the European's economy. The latest positioning data indicated that investors remain heavily long on the EUR.

In addition, market sentiment was dented by reports that Europe's Credit Suisse (CS) and Japan's Nomura (NMR) could see "significant and material" losses this quarter due to forced selling of shares last week linked to a struggling U.S.-based hedge fund Archegos Capital.

FXStreet reports that economists at Barclays expect the Canadian dollar to remain resilient on the back of fiscal support, higher oil prices and upbeat growth prospects. They forecast USD/CAD at 1.21 by the first quarter of the next year.

“We remain constructive on the loonie on the back of brighter growth prospects, extended domestic and external fiscal support, and higher oil prices.”

“The economy is proving to be more resilient than anticipated to the COVID-19 containment measures and the narrative of a more robust vaccine roll-out in H2 2021 alongside faster US and global growth implies a supportive backdrop for the currency.”

“We think Canada will be one of the main beneficiaries from international spillovers from President Biden’s stimulus plan.”

“We significantly revise down our estimated path for the USD/CAD across the forecast horizon and now expect it to weaken towards 1.21 by the Q1 22.” 

FXStreet reports that Axel Rudolph, Senior FICC Technical Analyst at Commerzbank, briefs that EUR/USD slips towards the November 11 low at 1.1745 as the pair looks for a slide into the 1.1695/00 band.

“EUR/USD has the November 11 low at 1.1745 in its sights while on the way to the 1.1695 to 1.1600 band. This represents the 38.2% retracement of the move up from 2020 at 1.1695, the 55-week ma at 1.1642 and the previous 2008-2020 downtrend which is located at 1.1600.” 

“Rallies will find initial resistance at the 200-day ma at 1.1867 and the near-term downtrend at 1.1870. This guards the more important 1.1990/1.2014 pivot.” 

• It is vital to maintain accommodative monetary policy

FXStreet reports that analysts at OCBC Bank note that the removal of the Brexit weight plus the successful vaccination drive had driven the GBP higher. However, the latest trade prints are reminding of Brexit’s negative realities, and the vaccination positives must fade eventually as Europe and ROW catch up.

“The GBP/USD’s recovery stalled at the 1.3800 resistance.” 

“As the positives from the vaccination drive fade, more attention will be placed back on the post-Brexit realities. This leaves us tempted to explore tactical shorts on this pair, targeting the previous low at 1.3670.”

FXStreet reports that analysts at Credit Suisse look for the S&P 500 uptrend to extend further to 4070/75 and ideally 4200.

“S&P 500 uptrend is slowing and although we stay bullish we think we are set for a choppier trend higher in Q2.”

“Above channel and psychological resistance at 3994/4000 is needed to see the immediate bullish tone maintained for our 4070/75 next objective, with a decent amount of ‘back and fill’ expected in this next phase of the uptrend. Whilst we will look for a fresh phase of consolidation at 4075, big picture, we continue to look for an eventual move to 4200.”

FXStreet reports that Axel Rudolph, Senior FICC Technical Analyst at Commerzbank, discusses USD/CHF prospects.

“USD/CHF has so far practically reached the 0.9421 June 23 low above which the mid-July high can be spotted at 0.9467. Further up sits the 50% retracement of the 2019-2021 decline at 0.9499.” 

“Our medium-term upside target is the 200-week ma at 0.9663.” 

“Slips should find support around the 38.2% Fibonacci retracement at 0.9324 below which the September high can be spotted at 0.9296.” 

Reuters reports that shipping group Maersk said that the stranding of a container ship in the Suez Canal has created disruptions in the global shipping industry that could take weeks and possibly months to clear.

“Even when the canal gets reopened, the ripple effects on global capacity and equipment are significant,” the world’s largest container shipping company said in an advisory statement for customers.

Maersk has three vessels stuck in the canal and another 29 waiting to enter, it said, adding that it had so far rerouted 15 vessels to sail south of Africa instead.

FXStreet reports that Morgan Stanley discusses US economy prospects.

“The Fed has a dual mandate to maintain both a healthy labor market and stable price inflation. On the former, the labor market is still heavily disrupted; and on the latter, price inflation has been unusually low for a number of years, leading the Fed to think that it's acceptable if inflation were to be a little bit higher for things to average out. Neither suggests the Fed's going to turn down that music soon. Indeed, at their most recent meeting earlier this month, the Fed reiterated that they may not raise interest rates materially until 2024 - even as the economy improves.”

“We do think this economic cycle will run hotter than normal and thus may be shorter than normal. But per current inflation expectations, we don't yet see signs that it will run too hot. It's an indicator that we'll be watching.”

According to the report from Bank of England, net mortgage borrowing was £6.2 billion in February, the strongest since March 2016. Mortgage approvals for house purchase were 87,700 in February: while higher than in February 2020, they have fallen from a peak of 103,700 in November 2020. Economists had expected a decrease to 95,000.

Individuals continued making net repayments of consumer credit in February (£1.2 billion). The effective rate on new personal loans remained low at 5.16%, compared to 7.03% in January 2020.

Private non-financial companies borrowed £0.7 billion from capital markets in February, compared to a monthly average of £4.5 billion since March 2020. Net bank borrowing by small and medium sized businesses was £0.4 billion in February, whilst large businesses made net repayments of £0.3 billion.

Households continued depositing significant amounts, with an additional £17.1 billion placed in February. Deposit interest rates remained at historically low levels.

Reuters reports that a survey by the Ifo economic institute showed that German exporters are increasingly optimistic to benefit from a pick-up in economic growth in Asia and the U.S.

Their expectations rose to 24.9 points in March, the highest value since January 2011, from 11.9 points in February, the Ifo said, adding that optimism had increased in nearly all sectors.

FXStreet reports that economists at Westpac forecast the aussie at 0.79 by the end of the second quarter.

“An extension to 0.7500 or below is plausible so long as the US dollar draws support from an economic rebound fuelled by a huge fiscal injection and rapid vaccine rollout. But our base case remains for the Aussie to trend higher, to 0.79 by end-Q2 and higher again in H2 21.”

“Australia continues to run historically very large trade surpluses, with Q1 set to be the eighth consecutive quarter of current account surpluses. A$ should benefit from anticipation of a synchronised global recovery over 2021, especially in Asia.”

FXStreet reports that the prices of precious metals dropped back last week. Against this background strategists at Capital Economics update their forecast for gold and silver by the end of 2021.

“We expect the price of silver to continue to fall relative to gold as industrial metals prices drop back. Our end-year forecasts are $20 and $1,600 per ounce for silver and gold respectively.”

“We think that the short-term outlook is brighter for palladium than platinum. Our view is primarily due to demand-side factors, which we think will keep the palladium market in deficit and push the platinum market back into surplus. We have revised up our end-year forecast for palladium to $2,700 per ounce, while we think platinum will fall to $900 per ounce.”

CNBC reports that Wilfred Wee, portfolio manager at asset management firm Ninety One, said that Chinese government bonds are in a “sweet spot” after last year’s sell-off — and now offer higher yields and much lower volatility compared to U.S. Treasurys.

Chinese 10-year government bond yield has settled at around 3.2%-3.3% in the last few weeks. In contrast, the 10-year U.S. Treasury yield has hovered around 1.65%-1.75%, even with the recent climb.

“I think in this part of the cycle, China fixed income feels to be in (a) sweet spot,” Wee told.

“The China bond market did sell off last year and that was on the back of better economics, first-in-first-out of the crisis ... China’s clearly, I think, way ahead in terms of having dealt with Covid and is now dealing with some of the structural issues like debt overhang, trying to invigorate consumption etc,” he said.

China was the first country to report the coronavirus outbreak, and the only major economy to have grown last year when it reported a 2.3% year-on-year expansion.

During today's Asian trading, the US dollar rose against the euro and declined against the yen.

"The euro is falling for three reasons: economic recovery, fiscal support for this recovery, and vaccination," analysts at Commerzbank said.

The market is betting on a rapid recovery in the US economy thanks to the economic support plan promoted by US President Joe Biden and the rapid vaccination against the COVID-19 coronavirus. Meanwhile, a new outbreak in Europe and slower vaccination rates threaten to slow the economic recovery.

White House Press Secretary Jen Psaki said Joe Biden on Wednesday will unveil the first part of his infrastructure investment plan totaling more than $3 trillion.

The Australian dollar fell 0.1% against the US dollar amid reports that Brisbane, the administrative center of the state of Queensland, will enter a three-day lockdown from Monday after several local cases of coronavirus transmission were detected.

The ICE index, which tracks the dollar's performance against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), rose 0.10%.

Reuters reports that a top Fitch Ratings official told that President Tayyip Erdogan's decision to oust Turkey's central bank chief entrenches his unorthodox view that high rates cause inflation and came shockingly early in Naci Agbal's stint as governor.

Douglas Winslow, director at Fitch's sovereign team, said the March 20 decision to fire Agbal after less than five months raises the risk of "looser and less orthodox" monetary policy in the months ahead.

Fitch has a stable BB- "junk" rating on Turkey and said in a report last week the change at the top of the central bank - Sahap Kavcioglu, a critic of Agbal's tight policy, was named governor - raises Turkey's inflation and external financing risks.

CNBC reports that Wall Street bull Ed Yardeni expects inflation to make a comeback. Yardeni predicts current market conditions will push the benchmark 10-year Treasury Note yield between 2.5% and 3% within the next 12 to 18 months.

″[It’s] not enough to really clobber the economy or the stock market. That’s not a calamity. It’s not a catastrophe. It is the bond vigilantes in some ways indicating some concern about inflation,” Yardeni said.

Yardeni coined the phrase bond vigilantes in the early 1980s to describe investors who want higher yields for government bonds as compensation for rising inflation.

“Most of the problem would be because of the so-called comparison effect where we’re comparing inflation to a year ago in terms of price levels, and price levels a year ago were depressed,” he noted. “If we get to 2.5%, even higher numbers say 2.8%, on a year-over-year basis in coming months, it would be correct to interpret that as more of a sign of how prices were a year ago than a take-off of inflation.”

“We’re going to have to get March, April, May kind of numbers to get a sense of what inflation is running as a result of the after effects of the pandemic,” said Yardeni, who spent decades on the Street running strategy for firms including Prudential and Deutsche Bank.

Even though he views inflation as the biggest market risk right now, he expects surging productivity and technological innovation will play a big role in lowering cost pressures.

“We have an economy that’s hot, and it’s going to be red hot as a result of the stimulus checks that are now being deposited in people’s accounts,” he said. “That being the case, I think earnings are going to be awesome.”

eFXdata reports that Barclays Research adopts a structural bullish bias on CAD.

"We remain constructive on the loonie on the back of brighter growth prospects, extended domestic and external fiscal support, and higher oil prices. The economy is proving to be more resilient than anticipated to the Covid-19 containment measures, and the narrative of a more robust vaccine roll-out in H2 2021 and faster US and global growth implies a supportive backdrop for the currency. In fact, we think Canada will be one of the main beneficiaries from international spillovers from President Biden’s stimulus plan. As such, we significantly revise down our estimated path for the USDCAD across the forecast horizon and now expect it to weaken towards 1.21 by the Q1 22," Barclays adds.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1918 (1304)

$1.1883 (54)

$1.1856 (313)

Price at time of writing this review: $1.1777

Support levels (open interest**, contracts):

$1.1754 (4271)

$1.1723 (4809)

$1.1685 (2005)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date April, 9 is 67170 contracts (according to data from March, 26) with the maximum number of contracts with strike price $1,1900 (4961);

GBP/USD

$1.3932 (828)

$1.3899 (129)

$1.3854 (210)

Price at time of writing this review: $1.3768

Support levels (open interest**, contracts):

$1.3740 (855)

$1.3691 (1238)

$1.3658 (1081)

Comments:

- Overall open interest on the CALL options with the expiration date April, 9 is 9648 contracts, with the maximum number of contracts with strike price $1,4100 (1178);

- Overall open interest on the PUT options with the expiration date April, 9 is 15372 contracts, with the maximum number of contracts with strike price $1,3750 (1238);

- The ratio of PUT/CALL was 1.59 versus 1.60 from the previous trading day according to data from March, 26

* - 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.