China economic data released on Wednesday underpinned risk mood in the markets. Activity in key manufacturing sector rose in March compared to the previous month. Export orders accelerated growth, which gave confidence to investors who hold the bet on global expansion as leading nature of this indicator suggests markets can expect growth in exports, real wages and import activity of trading partners in the coming month. The official PMI rose from 50.6 to 51.9, beating the forecast.
US markets closed in the red, SPX has been trying to break above 3980 points for two weeks, so far unsuccessfully. It is hoped that breakout will follow the announcement of Biden's infrastructure plan, since depending on the direction of government spending, Biden's economic plan could provide a significant increase in the revenue of US companies.
The dollar also rallied in anticipation of Biden’s speech, but as we discussed earlier, the dollar’s chances of growth are rising as the pace of recovery in advanced economies becomes patchier, with the US economy breaking out in the lead thanks to successful vaccinations and a faster pace of lifting restrictions that stifle activity.
A strong ADP report will boost the odds of positive labor statistics on Friday and will likely allow the dollar to accelerate gains against opponents as the topic of US recovery leadership has been driving the dollar's corrective rally this week.
The data on inflation in the Eurozone turned out to be mixed and in general fell short of the forecast. The broad consumer inflation index accelerated to 1.1% in March, but the main contribution was made by the rise in energy prices (+ 4.3%). Core inflation, which more accurately reflects the trend in consumer spending, slowed down from 1.1% to 0.9%. It is becoming harder for the ECB to argue that the inflation story is going according to plan, so there is a risk that it will intensify the rhetoric about the PEPP asset purchase program. This can only make the euro worse.
OPEC is scheduled to meet on Thursday, but the report from a preliminary Joint Technical Committee meeting showed that the organization is worried about recovery in demand as the infection rates rise, leading to tightening lockdowns and reduced consumer mobility. The forecast for demand growth in 2021 was revised down from 5.9 million to 5.6 million bpd. According to OPEC, oil reserves, despite relative unloading, still remain above the average level of 2015-2019. There is a risk that OPEC will extend production restrictions in May, which keeps prices from falling further.
Stock data from the API indicates a continued negative trend. Stocks rose by 3.91 million barrels last week, once again falling short of expectations. However, gasoline stocks fell immediately by 6 million barrels, which indicates a fairly strong demand in the United States and is a very positive moment of the report.
Technically, oil has dropped below a key trend line and is currently trading in a tight range. A potential disappointment at the OPEC meeting could send prices lower from the horizontal resistance level at $62 a barrel:
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