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Today, financial market participants will analyze a block of macro data from the United States, the publication of which is scheduled for 13:15, 14:45 and 15:00 (GMT). Among the data - the ADP report on employment in the private sector and PMI indices of business activity (from ISM and Markit) in the services sector of the US economy. Although the ADP report does not have a direct correlation with the official monthly data from the US Department of Labor, which will be published on Friday, however, the ADP report is often a harbinger of it, having a noticeable impact on the market. The growth in the number of workers in the US private sector in February is expected to be 177,000 (versus an increase of 174,000 in January, a fall of -123,000 in December). The relative growth of the indicator should have a positive effect on the quotes of the dollar and American stock indices. On the one hand, the improvement in the labor market indicates a further recovery of the American economy after its fall in the first half of 2020, and on the other hand, higher than in other developed countries, the pace of recovery of the American economy increases the demand from foreign investors for American assets and the dollar, both the national currency of the United States and the funding currency of the American stock market. At the same time, the US President Joe Biden's plan to support the economy in the amount of $ 1.9 trillion, approved by the House of Representatives of the US Congress last Saturday, improves the prospects for the American economy and the stock market and makes easier for the Fed to stimulate the economy.
At the same time, huge government spending heightens the risks of accelerated inflation, provoking a sell-off in bond markets and fueling investor fears that the US Federal Reserve will raise interest rates faster than it currently claims. This, in turn, will increase the attractiveness of the dollar as an investment tool.
Market participants will also pay attention today to the publication of PMI indexes of business activity (from ISM) in the services sector of the US economy.
These services sector (in contrast to the manufacturing sector) have practically no impact on the country's GDP, however, a result above 50 is considered a positive factor for the USD and for stock indices, since indicates the acceleration of business activity and the improvement in the state of the American economy. The forecast for February is 58.7, the same as last month, but against 57.2 in December.
Meanwhile, the dollar declined on Tuesday, despite the continuing rise in US government bond yields. As of this writing, DXY futures are traded near 90.67, 13 pips below today's opening price.
Fed spokeswoman Lael Brainard said Tuesday that the dynamics of the bond market last week "got attention". If Fed Chairman Jerome Powell on Thursday, during his speech, scheduled for 17:05 (GMT), also draws attention to the growing yields on government bonds, this may negatively affect the dollar quotes. One of the tools to restrain the growth of bond yields is an increase in the volume of their purchases by the FRS, i.e. expansion of the quantitative easing program, and this is a negative factor for the dollar. Such comments from Powell could limit the dollar's upward momentum in the short term.
Meanwhile, as shown by data published at the beginning of today's European session, business activity in the Eurozone continued to slow down (for the fourth month in a row).
IHS Markit's Composite PMI, while rising to 48.8 from 47.8 in January, indicated that activity continued to decline, albeit at a slower pace. Activity in the service sector has significantly reduced, although the corresponding PMI rose slightly (to 45.7 from 45.4 in January), remaining in negative territory, i.e. below 50.
According to economists at IHS Markit, this creates the preconditions for a second wave of recession in the Eurozone.
At the same time, despite weak European macro statistics, the EUR / USD pair remains in positive territory, primarily due to the weakening dollar.
At the time of publication of this article, the EUR / USD pair is traded near the 1.2100 mark, in the area of important support / resistance levels (see "Technical Analysis and Trading Recommendations").
