MORNING MARKET REVIEW

EUR/USD

The EUR/USD pair shows ambiguous trading dynamics, holding near 1.0940. Market activity remains subdued as investors analyze macroeconomic data released last week. On Friday, March 8, market participants drew attention to the decline in the annual dynamics of Industrial Production in Germany in January by 5.5% after -3.5% in the previous month, and in monthly terms the indicator strengthened by 1.0% after a reduction of 2.0% in December against a forecast of 0.6%, which allows the German economy to exit recession in the near future. The German Producer Price Index added 0.2% monthly after -0.8% in December, and slowed down by 4.4% year-on-year after -5.1%, while markets were expecting -6.6%. Trading participants also assessed statistics on the Gross Domestic Product (GDP) of the eurozone for the fourth quarter of 2023: on a quarterly basis, the figure remained at 0.0%, and on an annual basis it increased by 0.1%, which coincided with expectations. In turn, the February labor market report was published in the United States. Nonfarm Payrolls increased by 275.0 thousand in January after an increase of 229.0 thousand a month earlier, while experts expected an increase of 200.0 thousand. It should also be noted that the January figure was revised from the previous estimate of 353.0 thousand jobs. The Average Hourly Earnings in annual terms adjusted from 4.4% to 4.3%, and from 0.5% to 0.1% in monthly terms. At the same time, the Unemployment Rate in February increased sharply from 3.7% to 3.9%.

GBP/USD

The GBP/USD pair is trading in different directions, consolidating near 1.2850. Trading participants are in no hurry to open new positions, while the pound is still inclined to further rise, having completed last week’s trading with a noticeable increase. The British currency was supported, among other things, by the publication of the draft budget from UK Chancellor Jeremy Hunt, which allowed analysts to focus on real macroeconomic indicators, as well as expectations that the Bank of England is likely to launch a program to reduce borrowing costs, one of the last among leading central banks. Investors assume that the US Federal Reserve and the European Central Bank (ECB) will cut interest rates as early as June, while the Bank of England may begin to ease monetary conditions only in August. On Friday, March 8, the February report on the American labor market was presented: the Average Hourly Earnings slowed down from 0.5% to 0.1% in monthly terms, with expectations of 0.3%, and in annual terms, wage growth rates adjusted from 4.4% to 4.3%. The Unemployment Rate increased from 3.7% to 3.9%. Tomorrow the UK labor market data for January-February will be published. Forecasts suggest that Average Earnings Including Bonus may slow from 5.8% to 5.7%, and the Unemployment Rate may remain at the same level of 3.8%.

AUD/USD

The AUD/USD pair is showing a moderate decline, correcting after a noticeable rise at the end of last week. The instrument is testing 0.6610 for a breakdown, while traders expect new drivers to appear on the market. Tomorrow at 14:30 (GMT 2) updated February inflation data from the US will be presented: forecasts suggest that the Consumer Price Index will add 0.4% monthly and 3.1% annualized, with previous estimates of 0.3% and 3.1%, respectively, and the CPI excluding Food and Energy may be adjusted from 3.9% to 3.7%. In turn, the instrument is being slightly supported today by data on inflation dynamics in China: in February, the Consumer Price Index rose by 0.7% in annual terms after -0.8% in the previous month, while analysts expected 0.3%, and in monthly terms, the indicator accelerated from 0.3% to 1.0%, with a forecast of 0.7%.

USD/JPY

The USD/JPY pair is showing near-zero dynamics, holding close to 146.90. Investors are in no hurry to further sell the US currency, preferring to wait for tomorrow's publication of February statistics on consumer inflation. In addition, on Thursday, March 14, data on producer prices will be presented. Forecasts do not imply significant changes in the dynamics of indicators, and therefore the market reaction may be restrained. Meanwhile, the yen is supported by expectations of a possible abandonment of negative interest rates by the Bank of Japan. Analysts expect that already this month some members of the Monetary Policy Committee may speak out in favor of tightening the rhetoric. Meanwhile, macroeconomic statistics published today do not provide any support to the yen. Gross Domestic Product (GDP) in the fourth quarter of 2023 added 0.1% after -0.1% in the previous period, while analysts expected 0.3%, and in annual terms the figure was 0.4% with a forecast of 1.1%.

XAU/USD

The XAU/USD pair is consolidating near 2180.00, while trading participants expect new drivers to emerge. Last week, the instrument showed the strongest growth over the past few months, which was associated with a noticeable weakening of the American currency. Investors are preparing for the imminent launch of interest rate reduction programs by the world's leading financial regulators, while demand for the precious metal is growing amid increasing geopolitical risks. Significant support for the instrument's quotes is also provided by the increasing purchasing interest in gold from central banks, in particular the People's Bank of China. Meanwhile, traders are assessing the February US labor market report, published on Friday, March 8. The US Unemployment Rate rose from 3.7% to 3.9% in February, Average Hourly Earnings slowed down from 0.5% to 0.1% in monthly terms, which was below market expectations of 0.3%, and in annual terms the figure went from 4.4% to 4.3%. In turn, Nonfarm Payrolls increased from 229.0 thousand (revised from 353.0 thousand) to 275.0 thousand, with a forecast of a slowdown to 200.0 thousand.