Last week, the financial markets, after a sluggish start to the week, gained momentum with the release of the US PCE report, reinforcing expectations of interest rate cuts. US, European, and Japanese stocks had a strong start in March, with US stocks reaching new historical highs. This successive stimulus prompted a halt to the record six-month capital outflow in the Chinese stock market. The Japanese yen experienced fluctuations, and the Bank of Japan quickly changed its stance.

In market performance, all three major US stock indices closed higher, with the S&P and Nasdaq hitting new record highs. US bonds surged, NVIDIA's market value exceeded $2 trillion, gold surged to a historic high, and Bitcoin made a significant climb towards the $60,000 level.

The US Dollar Index had a mixed performance last week, initially showing a slight upward trend but experiencing a significant setback on Friday. The US dollar retraced as US data fell below expectations, and the Federal Reserve raised interest rates, causing the dollar to plunge below the 104.00 level, marking the second consecutive week of decline. Meanwhile, the Euro, in contrast, initially experienced a three-day decline, reaching a low of 1.0796, but had a strong rebound on Friday, ending the week with a small gain. The British Pound followed a similar pattern, fluctuating within the 1.27-1.26 range, but saw a significant rally on Friday, closing above 1.2650. The Japanese Yen had a relatively calm week, briefly touching 149.20 on Thursday but recovering above 150 on Friday, ending a four-week upward trend. The AUD/USD attracted some buyers before the weekend, rebounding from the two-week low of 0.6442, ending the week with a 0.62% decline.

Spot gold experienced a major breakout last week, surging nearly $40 on Friday amid weak US data, reaching a peak of $2088 and closing 2% higher, marking the largest gain in two and a half months. Simultaneously, spot silver faced a sharp decline early in the week but rebounded 2% on Friday, closing above $23 and ending the week with a 0.87% overall gain.

In the oil market, both Brent and WTI crude oil had a strong breakout last week, with Brent rising over 3% and WTI surging 3.77%, breaking above $80 for the first time in nearly four months, reaching the highest settlement price since November of the previous year. Both experienced their fifth consecutive week of gains, contrasting with the cumulative decline over the previous seven weeks, amid the ongoing Israel-Palestine conflict.

Looking ahead to this week, the focus will be on central bank interest rate decisions, with the European Central Bank meeting on Thursday, the US monthly employment data on Friday, and the UK Spring Budget on Wednesday. Additionally, China's National People's Congress, starting on Monday, will be closely monitored. Other events include Australia's GDP data and the decision from Malaysia's central bank, along with various data reflecting the enthusiasm for recovery and service industry activities in the Asia-Pacific region.

Expectations for the European Central Bank meeting on Thursday suggest no change in the 4.00% deposit rate. Any reactions in the Euro and Eurozone bonds will depend on the ECB's new economic projections and accompanying comments regarding the timing of the first rate cut and clues about the magnitude of rate cuts in 2024. Currently, the market anticipates a high probability of a rate cut in June, but some analysts expect the ECB to wait until July. While an earlier cut in April seems unlikely, it cannot be ruled out. Any possibility of a later-than-expected rate cut could lead to an increase in the Euro and Eurozone bonds.

In the US, the February non-farm employment data will be released on March 8, with expectations that the economic report for February will be weaker than January but still demonstrate economic resilience. The market will closely monitor this report to assess the health of the US economy and evaluate how much and when interest rates will fall this year. The Federal Reserve expects three rate cuts this year. Based on current market pricing, June or July seems most likely for the start of rate cuts, but uncertainty remains despite recent strong economic indicators and increasing inflation. The ADP and JOLTs job vacancy data to be released on Wednesday, along with the weekly initial jobless claims on Thursday, will also be scrutinized for further clues about the health of the US job market.

In the UK, the Spring Budget will be announced on Wednesday, and it is expected to include fiscal incentives in the form of tax cuts or increased public spending before a potential general election in the second half of this year. Fiscal stimulus measures could boost the economy and potentially delay rate cuts by the Bank of England, the European Central Bank, and the Federal Reserve, supporting the British Pound. However, the recent rise in UK government bonds may limit the government's ability to implement fiscal stimulus.

Japan will release new inflation data, specifically the Tokyo CPI for February, on Tuesday, which will be closely watched. The market's bet on the Bank of Japan's exit from negative interest rate policy in the spring received a boost last week when Japan's national inflation data exceeded expectations and remained at a high target level, despite the Consumer Price Index reaching its lowest level in nearly two years.

In Australia, GDP data for the fourth quarter will be closely monitored on Wednesday. After lower-than-expected expectations for the quarter, the anticipated data could raise concerns that the Reserve Bank of Australia may have tightened its policy too tightly in the third quarter.

Economists still believe that the Australian economy will grow this year, especially considering some recent warnings issued by the Reserve Bank of Australia. Although it may seem to be growing rapidly, the pace of growth may slow significantly, but further increases are possible in the near term.

For China, with the annual "Two Sessions" starting this week, the market will focus on Beijing's goals for 2024. Currently, the Chinese government is working to restore confidence in the stock market, which has suffered from a series of measures to boost sentiment, including restrictions on short selling and crackdowns on high-frequency trading. Last week further reinforced these measures as the stock market marked a continuous six-month outflow despite hitting historic highs. However, traders are now turning their attention to this week's National People's Congress. After causing significant damage over the past three years, China's stock market finally ended its six-month capital outflow in February. Overseas investors bought 60.7 billion yuan ($8.4 billion) of onshore stocks last month through the Stock Connect between Hong Kong and mainland stock exchanges. It is reported that Chinese policymakers are using offshore accounts of government support funds to help boost the market.

The latest data shows continued declines in housing prices, raising concerns in the market about the effectiveness of recent stimulus measures and indicating that further assistance to the real estate industry will be welcome news.

This Week's Key Events and Economic Data Overview: (Beijing Time)

Major Events:

Monday (March 4): The Second Session of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC) opens in Beijing.

Tuesday (March 5): Bank of Japan Governor Haruhiko Kuroda delivers a speech.

Wednesday (March 6): March 6 House hearing: Federal Reserve Chairman Jerome Powell presents the semi-annual testimony (March 7 Senate hearing: Federal Reserve Chairman Jerome Powell presents the semi-annual testimony); Bank of Canada announces the interest rate decision; Bank of Canada Governor Tiff Macklem holds a press conference on monetary policy.

Thursday (March 7): European Central Bank announces the interest rate decision; ECB President Christine Lagarde holds a press conference on monetary policy; US President Biden delivers the State of the Union address to Congress.

Economic Data Overview:

Monday (March 4): Eurozone Sentix Investor Confidence Index for March; Canada National Economic Confidence Index for the week ending March 1.

Tuesday (March 5): Japan's CPI year-on-year for February; Australia's Q4 Current Account (in billion AUD); China's Caixin Services PMI for February; UK's final Markit Services PMI for February; US January Durable Goods Orders revision (%); US January Factory Orders (%); US February ISM Non-Manufacturing PMI.

Wednesday (March 6): Australia's Q4 GDP seasonally adjusted quarter-on-quarter (%); Australia's Q4 GDP year-on-year (%); Eurozone January Retail Sales month/year (%); US February ADP Employment Change (thousands); US January Wholesale Inventories month-on-month final (%); US January JOLTs Job Openings (thousands).

Thursday (March 7): Australia's January Goods and Services Trade Account (in billion AUD); Eurozone Main Refinancing Rate for March; US January Trade Balance (in billion USD); US initial jobless claims for the week ending March 2 (thousands).

Friday (March 8): Eurozone Q4 GDP seasonally adjusted month/year final (%); US February Non-Farm Payrolls seasonally adjusted (thousands); US February Unemployment Rate (%); US February Average Hourly Earnings year-on-year (%); Canada February Employment Change (thousands); Canada February Unemployment Rate (%).

Silver Market Analysis:

Fed Hawkish Comments Restrained Silver's Sharp Upside

Silver exhibited a pattern of initial decline followed by a rebound last week, with prices rising above $23 per ounce. At the beginning of the week, it retraced to a two-week low of $22.27, rebounding to a high of $23.26 later in the week. The metal traded within a narrow range of less than 100 points throughout the week. Despite the general softening of the US dollar and Treasury yields, silver maintained a three-day consecutive rise in the latter part of last week. This was also supported by the latest data from the National Bureau of Statistics (NBS) and Caixin, showing an improvement in China's service and manufacturing activities. China is the world's largest consumer of gold.

In February, China's non-manufacturing Purchasing Managers' Index (PMI) rose from 50.7 in January to 51.4, exceeding the expected 50.8. Additionally, China's Caixin Manufacturing Purchasing Managers' Index (PMI) for February increased from 50.8 in January to 50.9, surpassing the market consensus of 50.6. Earlier released US Core Personal Consumption Expenditures Price Index (PCE) YoY for January matched expectations at 2.8%, but showed a slowdown from the 2.9% growth in December. The Fed's preferred inflation gauge slowed down toward the 2.0% target, briefly pressing the US dollar and pushing silver toward the key threshold just below $23.00. However, hawkish comments from Fed policymakers restrained a significant upside for silver.

On the daily chart, the price of silver continued to decline from the beginning of last week until the middle of the week, dragging the white metal to a two-week low of $22.27. It then rebounded to a high of $23.26 later in the week, trading within a range of less than 100 points for the entire week. From a broader perspective, after a slight recovery from the low of $22.27 region on Wednesday, silver seems to have entered a stagnation phase. The Bollinger Bands are gradually narrowing, indicating that silver may operate within the range of $22.03 (Bollinger Bands lower line) and $21.91 (76.4% Fibonacci retracement level from 20.68 to 25.90) to $23.07 (60-day moving average) and $23.29 (50.0% Fibonacci retracement level). Additionally, the 14-day Relative Strength Index (RSI) on the daily chart oscillates around the 55.00 region, indicating a bullish bias among investors. From a technical perspective, upward potential can be observed around $23.50 (high on February 16) and $23.91 (38.2% Fibonacci retracement level). On the downside, consider $22.68 (61.8% Fibonacci retracement level), with the next level looking towards $22.27 (last week's low).

Conclusion for the Week:

Despite silver trailing, it remains an attractive value investment in a bull market. The 14-day Relative Strength Index (RSI) on the daily chart oscillates around the 55.00 region, indicating a bullish bias among investors. From a technical standpoint, this suggests that silver's short-term trend continues to be upward consolidation.

Weekly Range: $21.90—$23.91.

Weekly Recommendation: Consider shorting silver on rallies this week.

USD/CNH Analysis:

Renminbi May Experience Mild Depreciation in the First Quarter

The latest data from the National Bureau of Statistics of China indicates that manufacturing activities contracted for the fifth consecutive month in February, signaling sluggish demand hindering growth. The market is currently focused on what policy support the Two Sessions (Lianghui) this week will provide. Due to seasonal factors and the continued impact of low business confidence, China's manufacturing activities contracted for the fifth consecutive month in February, indicating that weak demand remains an obstacle to economic development. The official Manufacturing Purchasing Managers' Index (PMI) dropped slightly to 49.1 last month, as stated in a Friday statement by the National Bureau of Statistics. Since October of last year, the Manufacturing PMI has remained below the threshold of 50, reflecting uncertainty about China's economic prospects and weak domestic demand.

Meanwhile, the USD/CNH has been fluctuating within a range of 200 pips (7.18 - 7.22) for the past month. In fact, since November of last year, the Renminbi exchange rate has entered an appreciating channel, successively recovering the 7.3 and 7.2 levels. However, at the beginning of 2024, influenced by changes in market expectations for the timing of the Fed's interest rate cut, domestic policy adjustments, and other factors, the Renminbi exchange rate fluctuated and depreciated from its peak of 7.086 in January to 7.2337. Due to changes in the marginal economic conditions of China and the US, the Fed's interest rate cuts, and the devaluation of the US dollar, the Renminbi against the US dollar is expected to appreciate slightly this year, but there is no particularly strong upward potential, and a mild depreciation is possible in the first quarter.

On the daily chart, USD/CNH has closed lower only one day out of the past seven trading days. The Relative Strength Index (RSI) is in the positive territory (latest reading at 55.17), implying potential bullish strength and supporting the prospect of further upside. This bullish sentiment is supported by the US Dollar Index holding above 104.00, highlighting the long-term resilience of buyers. Any subsequent uptrend may encounter resistance around 7.2263 (Bollinger Bands upper line) and 7.2355 (resistance line of the ascending triangle). Next is the horizontal level near 7.2479 (61.8% Fibonacci retracement level from 7.3470 to 7.0875), which, if decisively cleared, could pave the way for breaking the significant barrier of 7.2688 (high on November 16, 2023). Regarding the downside, from a technical perspective, the USD/CNH currency pair has shown resilience below the convergence point of 7.2070 (support line of the ascending triangle) and 7.2000 (psychological level), seemingly preventing a pullback from 7.2120 (Bollinger Bands centerline) overnight. 7.1866 (38.2% Fibonacci retracement level) and 7.1848 (60-day moving average) should now be short-term key support levels.

Conclusion for the Week:

Looking ahead to the next stage of the Renminbi exchange rate, influenced by changes in the marginal economic conditions of China and the US, the Fed's interest rate cuts, and the devaluation of the US dollar, the Renminbi against the US dollar is expected to appreciate slightly this year.

Weekly Range: 7.1848—7.2355.

Weekly Strategy: This week's recommendation is to consider shorting the USD on rallies.







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