FX.co ★ The fate of the dollar in the "hands" of the U.S. consumer inflation

During the entire week previously, one hundred percent influence of the situation was influenced by the American stock market. High volatility, accompanied by a sharp drop and rise of stock indexes, predominates the beginning of the week, which sparked fears that panic could start in the market. However, after the collapse on Monday along with a number of speeches by Fed members, it showed that turbulence in the markets does not cause them any concern as the gradual decline in stock indices continued.

In the understanding of further prospects, the dynamics of the US Treasury government bonds yields are important. The yield on the 10-year Treasury benchmark finished the week at the local highs of 2.857%. This indicates that the market perceives the current decline in shares not in the form of a panic and corrective but as a continuation of sales on the debt market can lead to further growth in profitability. In this case, it is believed that the excess of the yield of the 10-year bonds reached above the 3.0% mark that will become a real trigger in the continuation of a corrective decline of the stock market in the United States and a decrease in demand for risky assets in the world. In this situation, the US dollar will begin to enjoy noticeable demand.

On this wave, it is expected that we get closer to the meeting of the Fed on monetary policy, whereas the results will be known on March 21st. The dollar may receive more visible support, but only if the outgoing data on the U.S. economy will show a positive attitude, and the figures on consumer inflation will indicate the continuation of the upward trend.

So far, according to the dynamics of futures on federal funds rates, the probability of interest rate growth by 0.25% to 1.75% is estimated at 71.9% in March. While there are still a significant number of skeptics on the market, their numbers will diminish considerably if inflation increases. This will be a strong supporting factor for the dollar, which is currently hampered by investors' hopes that some central banks, whose major currencies will decide in changing their monetary rates this year. Primary central banks are the European Central Bank (ECB) and the Bank of England (BOE).

In summary, we emphasize that the forecast of the dollar will either grow weakly or continue to consolidate before the Fed meeting, remains in force.

Forecast of the day:

The EUR / USD pair is trading in the range of 1.2200-1.2300 in anticipation of the release of data on the GDP of the eurozone and consumer inflation in the US, which will be published this week.

The GBP / USD pair is above the level of 1.3845. Breaking this level may lead to a drop in the price of 1.3745.