USD index rallies above 96.0

Wednesday, March 04, 2015

Disappointing US economic data weighed on market sentiment and limited risk appetite in today’s trading session. The Dow Jones dropped over 150 points (-0.86%) towards 18,000, while the S&P 500 and NASDAQ retreated over 0.8%, at the time of writing.

The US ADP National Employment report showed the US private sector created 212,000 jobs in February, compared to 219,000 initially expected. It seems that the report tends to be a useful indication ahead of Friday’s non-farm payroll data. In addition, Markit Services PMI was reported at 57.1 in February fairly in line with expectations of 57.0, while the ISM non-manufacturing composite rose slightly to 56.9 in February from 56.7 in January. Furthermore, we received fairly modest Markit services PMI data from Eurozone, as Germany’s services PMI dropped sharply to 54.7 in February compared to 55.5 expected, while the overall Eurozone’s figure was reported at 53.7 in February compared to 53.9 in January. The euro came under further pressure and extended losses towards 1.1050 against the US dollar, amid ongoing concerns over the Eurozone’s economic stability and prospects.

The release of the weekly EIA oil inventories report was very bearish after showing another week of large builds in crude oil stocks as oil demand remains fairly limited. Crude oil inventories rose sharply by 10.3 million barrels from the week ending 27th February against analysts’ estimates of a build of 3.8 million barrels. Brent front month futures plunged over 2.2% trading below $60 per barrel, while WTI front month futures gave back earlier gains and retreated below $50 per barrel, at the time of writing. 

Brent front month futures

COJ5 Comdty (BRENT CRUDE FUTR  A 2015-03-04 16-02-59

The stronger USD weighed on most commodity prices in today’s session as the USD index rallied strongly and breached 96.0 against a basket of currencies. Aluminium, copper and zinc extended declined while lead and tin posted modest gains within the recent range.

USD index rallies above 96.0

DXY Curncy (DOLLAR INDEX SPOT)   2015-03-04 15-41-21

Precious metals reversed recent gains and traded into negative territory today. Gold slid lower to retest $1,200/ounce, while silver retreated towards $16. The main focus will turn to the release of the US Federal Reserve Beige Book details this evening. 

More from: Myrto Sokou