Financial market research and analysis

The US dollar firmed against its G10 counterparts on the back of the rising hawkish Federal Reserve (Fed) pricing into the FOMC’s March meeting.

As a cherry on top, Fed Governor Brainard, who is known as one of the FOMC’s most dovish members, has given her endorsement to an interest rate hike ‘soon’. The odds for the March meeting have changed completely. As of today, the market assesses 86% probability for the Fed to raise interest rates by 25 basis points on March 15 meeting.

This makes the US dollar the bulls’ best friend.

The US stocks renewed record for another day. The Dow Jones took out the 21K handle and rallied to $21169.11. It was the fastest $1000 gain on record. Financials gained 2.11% in New York; energy and mining stocks advanced 1.23% and 1.49% respectively. The S&P500 hit $2400 for the first time.

The US stocks are expected to open flat and could benefit from another good day of trading. There are no signs of anxiety in the market.


Timing looks good for Snap Inc. to go public

Snap Inc. will start trading on NYSE (New York Stock Exchange) today and could well surf on the wave of large-scale optimism in the US stock markets.

The company sold 200 million shares at £17/share in its IPO (initial public offering), which values the company to $20 billion.

A strong debut could take the price up to $20 at the first day of trading.


Gold appetite declines on improved US yields

Gold softened to $1236 as money flew into the stocks in Wall Street. The yellow metal traded within $1245/$1250 in Asia. The fact that the US’ core PCE remained steady at 1.7% year-on-year in January waned the inflationary concerns and kept the inflation hedging trades on the sidelines. Improved US yields are expected to cap the short-term appetite in the safe heaven gold. The key resistance is eyed at $1262 (200-day moving average). A deeper downside correction to $1230 and $1210 (minor 23.6% retracement and major 38.2% retracement on December 14 to February 26 recovery) is possible without compromising the mid-term positive trend.


Euro in top sellers’ hands

The EURUSD traded down to 1.0514. The divergence between the Fed and the European Central Bank (ECB) policy outlook is supportive of a cheaper euro against the greenback. The Eurozone’s February inflation estimates are due today. The core inflation is seen steady at 0.9% year-on-year, the headline inflation unchanged at 1.8%y/y. Markets remain seller on euro rallies. It is probably just a matter of time before the EURUSD slips below the 1.05 mark.

The EURGBP recorded a positive breakout as the sell-off in the pound intensified. The euro-pound cross advanced to 0.8585 (200-day moving averages). Sellers trail below 0.8600 for a potential correction to 0.8555 (100-day moving average) before 0.8500 level, as UK PM Theresa May bumped into Parliament’s opposition on a bill regarding the EU citizens' right to continue living in the UK after the Brexit. The rejection revived hope that the Parliament’s implication would smoothen the EU exiting process and hinted at a softer Brexit.


Quick glance to Asia

Most of the Asian stocks joined the global reflation rally on Thursday. Nikkei (+0.88%) and Topix (+0.75%) gained on the back of softer yen.

The USDJPY closed above its 100-day moving average (113.42) on Wednesday and extended gains to 114.16 in Tokyo. The stronger US dollar suggests a continuation of the positive trend toward the 115.00/115.50 zone. Japanese Finance Minister Aso reminded that wider US-Japan interest rate differential would cause the USDJPY to rise further.

Chinese stocks were left outside the rally. Hang Seng (-0.24%) and Shanghai’s Composite (-0.52%) closed the day on a negative note.

Australian stocks rose for the first time in six sessions on the back of the record rally in Wall Street. ASX 200 surged 1.26%.

The AUDUSD weakened (-0.27%) as the unexpected fall from A$3334 to A$1302 in January trade surplus weighed on the mood, meanwhile higher US yields kept the carry traders sideways.

Still, buyers are touted at 0.7604 (minor 23.6% retracement on December 22 to February 22 rise) and 0.7545 (200-day moving average). The topside is presumed clear up to 0.7785 /0.7800 mid-term resistance area.