Temporary calm as the Fed begins eyeing bonds, ahead of NFP hints

Markets are relatively calm on Wednesday after the dollar was on the back foot on Tuesday, a result of stable US yields. The US ADP NFP, ISM Services PMI, additional speeches by Fed officials and the UK budget promise a busy day, which also includes stimulus reaching the US Senate.

Calm: S&P 500 futures are on the rise, the dollar remains down and gold is consolidating its recovery early on Wednesday, as US ten-year Treasuries cling to 1.40%.

Fed: Lael Brainard, Governor at the Federal Reserve, said that the speed of the move in bond markets “caught my eye” – a first statement of concern about the sell-off in debt from the central bank. Her colleague Mary Daly repeated the message that the move reflects optimism about growth. The Fed releases its “Beige Book” including anecdotal evidence on the economy later on Wednesday, and Chicago Fed President Charles Evans also speaks.

NFP hints: ADP’s labor market report is set to show an increase of 177,000 private-sector jobs in February, a hint toward the official Nonfarm Payrolls figures on Friday. The ISM Services Purchasing Managers’ Index is forecast to hold up at 58.7 but show a slowdown in hiring. ISM’s Manufacturing PMI beat estimates, with the inflation component standing out with a surge.

Stimulus: President Joe Biden urged the Senate to approve his $1.9 trillion bill without making significant changes. Democrats already abandoned including a minimum wage hike, and face pressures to limit the scope of checks to individuals.

UK budget: Chancellor of the Exchequer Rishi Sunak is set to present a new budget for Britain, which will likely include an extension of the furlough scheme through September. The government already spent £300 billion on coronavirus relief. Plans to plug the hole in government coffers may consist of tax hikes.

EU: European Central Bank members continued warning about the rise in sovereign bond yields, vowing to act if necessary. German states are set to agree on extending current restrictions until late March while Italy is mulling imposing new limits until early April. Europe’s vaccination campaign remains sluggish. Markit’s final Services PMIs are eyed.

Vaccine: Biden announced a deal in which Merck will produce Johnson and Johnson’s shots in something akin to a “wartime effort.” The White House intends to offer COVID-19 jabs to all Americans by the end of May.

Bitcoin has been extending its recovery, topping $49,000 after a period of consolidation. Ethereum is changing hands above $1,500 and XRP tops $0.40.

WTI Crude Oil is hovering above $60 as tensions mount toward Thursday’s OPEC+ meeting.

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