The market does not respond to statistics

Analyse der Finanz- und Warenmärkte

Market Watch review. 26.03.2021

In today's release, we’ll cover the following topics:

  • The market ignores business activity indices. 
  • Increase in oil reserves. 
  • EU Economic Summit and US retail sales. 

The financial markets have changed a lot in the last few months. This may be too loud of a statement, but we are indeed witnessing a global change in a number of economic processes and, as a consequence, reactions to them. In particular, Wednesday's report on changes in business activity in the service sector, as well as in the manufacturing sector in most European countries, recorded strong growth. Simply speaking, very good macroeconomic statistics for the currency block were published, but there was no strengthening of the European currency.

The EUR / USD currency pair added a little more than 30 points at the time of the publication of the above statistics. At the same time, the growth of the EUR/JPY currency pair was only 55 points, which is incomparable with its previous decline of more than 160 points. As a result, we observe almost complete disregard for statistics aimed at strengthening the single European currency. This, in turn, significantly increases the probability of its weakening in the medium term. 

If you pay attention to the last few reports on changes in US oil reserves, you will notice a similar market reaction. Since mid-February, we have seen significant increases in US oil reserves, including record growth rates. Nevertheless, none of these reports have been accompanied by a surge in sellers' activity in the oil market, thus indicating a shift in focus from reserves to other, apparently more important indicators.

It is difficult to say with certainty what exactly is the main driving force for the oil market at the moment. Most experts point to the importance of global economic recovery and the ability of the world's largest countries to cope with the pandemic. At the same time, the collective imposition of sanctions against China, one of the leaders in oil consumption, is not putting strong pressure on oil quotations. While a significant increase in the level of business activity, primarily in the manufacturing sector of the EU countries, did not contribute to the growth of oil prices.

And now let's move on to today's events. First of all, I will pay attention to the IFO report. General improvement of business sentiment in Germany may provide some support to the euro. At the same time, it is important to follow the information coming from the EU Economic Summit. However, the more significant event for the foreign exchange market may be the publication of the report on the changes in consumer spending in the United States. Unexpectedly strong growth may increase the activity of the US dollar buyers.

Closely monitor the news background and be prepared for all the surprises of the market.


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