The Wall Street stock exchange underwent a correction yesterday. However, its extent was merely cosmetic and there was no significant breakthrough on the charts of the main indices. The rate of the primary currency pair established a local peak around 1.0865, but the quote remains in consolidation in the short term. Today, we will learn about the ISM service sector report in the U.S. The industrial indicator on Friday was disappointing. Greater volatility may occur around 4 pm. Earlier, we will receive the final PMI indicators from Europe which should not, however, stir up major emotions. On Thursday, the ECB will make a decision on interest rates. Today, the Chinese Prime Minister presented his first government work report to commence the annual meeting of the National People’s Congress. Bitcoin reached a historical record level.
Today, we have “Super Tuesday” which means that primaries for Republicans and Democrats will take place in 16 states in the U.S. The Supreme Court of the U.S. ruled that Donald Trump can appear on the presidential ballot papers this year. The unanimous decision overturned the Colorado Supreme Court verdict prohibiting the former president from running again due to his attempts to invalidate his 2020 election loss. The ruling came ahead of today’s primaries in which Trump hopes to secure a decisive victory.
Yesterday, Raphael Bostic spoke about monetary policy, stating that he expects the first reduction of interest rates by the Fed, planned for the third quarter, will be followed by a pause to evaluate the impact of the policy change on the economy. Bostic said he worries that companies may have too much enthusiasm and may unleash new demand after the rate cut, thereby increasing price pressure. He also added that he wants to reduce the size of the Fed’s balance sheet at the current rate for a while.
Today, the annual meeting of the National People’s Congress of China began. Prime Minister Li Qiang announced a GDP growth target of about 5% for this year, the same as last year. China is facing many adversities (real estate market crisis), so the set target is highly ambitious. The government will have to more effectively implement stimulus incentives to boost the economy. The issuance of long-term special treasury bonds is planned for this year. This is a clear signal that Beijing plans to use additional fiscal resources to support the economy, and the central government is taking on the financial burden of local governments. The official target fiscal deficit of government institutions and local governments has been set at 3% of GDP, down from 3.8% last year. The decision of the prime minister to not hold a press briefing after the week-long meeting possibly surprised the market. There will also be no further briefings during his five-year term.
Yesterday’s macro calendar was sparse. There were no data from the U.S. From Europe, we only learned the Sentix index, which is admittedly a second or even third-rate publication. Investors’ attention today will be focused on the ISM service indicator, which is, after all, more important than the industry. A small decrease of the main indicator is expected from 53.4 to 53 points. We would certainly see a strong market reaction in case of worse data, especially when the ISM would settle below the critical level of 50 points. Investors will also be keeping an eye on, and evaluating, the employment sub-indices, paid prices, and business activity. From tomorrow, data from the U.S. labor market (JOLTS, ADP – Wednesday, NFP – Friday) will start coming in. Let’s not forget about Powell’s speech before the Financial Services Committee of the House of Representatives and the Banking Committee (Wednesday-Thursday). The question session may be particularly interesting.
Written by Łukasz Zembik from Oanda TMS Brokers.
