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Equity market rebounded with yields receding, and EUR finally ended its 4-day loss on Dollar weakness before ECB’s meeting

BLOG March 10, 2021 at 05:47 am (GMT)

• Equity market rebounded with inflation data to be released soon
• EURUSD slightly up on Dollar weakness after a 4-day long loss
• GBP loses ground to ZAR as the demand on ZAR goes up but still shows strength against JPY

US tech stocks rebounded on Tuesday after some heavy losses earlier in the week and during the previous week. Tesla rose nearly 20%, helping the Nasdaq index to close at 4% higher. Dow Jones, S&P 500 and Russell 2000 all moved higher, closing 0.1%, 1.42% and 1.91% respectively. APAC stocks also recovered, with only Chinese stocks lagging behind. China’s CSI 300 index failed to move higher despite reports indicating that state-back funds had begun purchasing equities to support the market. Investors in both the US and China are eyeing on the inflation data which would be released during Wednesday’s sessions in both countries’ time zones respectively. The consensus for the US February inflation is currently at 1.7% on a YoY basis, a 0.3% rise from the prior month. Key reasons include rising energy prices. Core inflation forecast – excluding energy and other volatile products – currently points to 1.4%, unchanged from the prior month.

EUR has ended its 4-day losing against USD on Tuesday ahead of ECB’s meeting later this week. Eurozone quarterly GDP has been revised down to -0.7% in Q4 from the preliminary reading of 0.6% due to the extended lockdowns and weak economic growth in regions other than Germany. European bond yields, however, have been driven higher along with the US yields, potentially due to investors’ expectations that lockdowns will be ended, albeit slowly. During its meeting on Thursday, ECB is expected to address the rates amid rising bond yields. Market consensus is that ECB will hold its rates steady and will not be panicked by the upticks on yields.

GBPZAR exchange rate fell by -0.3% during the previous session and currently hovers around 21.27 at press time. ZAR benefited from the release on South Africa’s latest Q4 GDP data, landing at 6.3% QoQ and beating the forecasts. However, the economy contracted 7% in 2020 versus a 0.2% growth in 2019. The expansion has been primarily led by manufacturing, construction and trade. As a result, demand on ZAR went up. However, despite GBP losing to ZAR, it still shows much strength against other currencies such as JPY. Britain has achieved 33.5% vaccination rate of the total population – a powerful progress which has been boosting the local currency for a while. Last week, GBPJPY made a solid advance from 148.41 to 149.95, given Japan’s weak economic performance. Final Q4 GDP for Japan has been revised down to 2.8% from 3%, with household spending for January fell by 6.1% YoY.