As the market action in Europe starts to warm-up a number of themes are already underway in early Tuesday trade. The US dollar index is stronger across the board again today as the bullish momentum in the buck from last week continues to spill over into the first trading week of March.
The extremely strong February ISM manufacturing report has set the tone for early week trading already, as traders and investors continue to bet that the United States economy is well on the way to recovery mode.
At the time of writing the EURUSD pair has breached the February low, and looks set to crack the psychological 1.2000 support level over the coming sessions. Sterling has also fallen below the 1.3900 level and looks primed for further weakness as the US dollar index continues to pick-up steam above the 91.00 handle.
Oil weakness is another big theme today, both WTI and Brent oil are trading down by over one percent over fears about an end to OPEC supply cuts. Reports suggest that Saudi Arabia and Russia are set to clash at the March 4th meeting.
Additionally, reports suggest that the data is showing that demand could be wavering for oil, which is also causing intraday price pressure. Overall, expect the negative sentiment to persist towards oil until the OPEC meeting provides some clarity on Thursday.
Today’s Reserve Bank of Australia interest rate decision proved to be a non-event as the RBA kept rates and QE unchanged. The RBA were active in the bond market yesterday, however, bond yields are rising again today.
The Australian dollar is typically the main beneficiary when the RBA keep rates on-hold and leave QE on-hold. The AUDUSD pair has staged a minor recovery, however, US dollar strength and rising Australian bon yields are starting to weigh on the Aussie.
In other news, the CBOE is seeking to list a Bitcoin ETF in the United States. Bitcoin has had a minor pop above the $50,000 level but is now starting to struggle with this key benchmark level.
Data Watch
The economic calendar is heavily German centric during the European session as Europe’s largest economy releases retail sales and unemployment data. The release of eurozone Consumer Price Index is also in the mix today.
Moving into the United States trading session, the release of the Canadian Gross Domestic Product report headlines the economic data. Traders and investors also look to a scheduled speech from Federal Reserve member Brainard.
Today’s main themes for traders are set to be rising bond yields and US dollar strength. The S&P 500 and Nasdaq are lower in the futures market as tech comes back under pressure.
Something else to watch is the divergence between the Dow Jones and other US indices. The DJIA is starting to rise while the S&P 500 and the Nasdaq turn lower as the market turn bullish towards the real economy, and more so since yesterday’s bumper ISM manufacturing number.
