FX.co ★ Trade contradictions and the drop in demand for risky assets push the dollar up

Concerns about the growth prospects of the global economy continue to put pressure on investor sentiment.

After a rather low active trading session on Wednesday against the background of a weekend in the States, dedicated to the memory of ex-President George Bush Sr., on Thursday, the US debt market resumed its growth in demand for defensive assets and, as a result, falling Treasury yields. The benchmark yield of 10-year-old treasuries at the time of writing this article is at the level of 2.879%, which is below the key level of 3.00%.

Stock markets in the Asia-Pacific region show a negative trend. Quotes of "black gold" are consolidating in a narrow range in anticipation of the final OPEC + decision on reducing the volume of crude oil to maintain prices. If this decision is made at a meeting in Vienna at the headquarters of the cartel today, it can support prices, but, in our opinion, it can hardly change the trend noticeably in the future.

Earlier, the rise in oil prices was not only supported by OPEC + measures, but also by increased demand, which was formed due to the global economic recovery after the severe crisis of 2008-09. Now, the situation is the opposite. The end of the ten-year cycle of global economic growth, accompanied by trade wars, will lead to a drop in oil demand, which, at best, against the background of a possible decline in production volumes, will only restrain prices from further falling.

Investors understand that the 90-day truce in the trade war between the States and China will not solve the global problem of trade confrontation between countries and the world's largest economies. Against this background, commodity group currencies, Australian, New Zealand, and Canadian dollars, came under strong pressure. If the first two are sensitive to the situation in trade between Australia, New Zealand, and China, the second one shows a weakening amid recognition by the Bank of Canada that inflation may decline in the short term, and the national economy will continue to slow down.

In this situation, investors again drew attention to defensive assets. As mentioned above, the American treasuries, the yen, the Swiss franc, and the American dollar are in demand. Which is only intensifying in the wake of growing global concern about the state of the world economy. In addition, it should be borne in mind that the still growing labor market in America may stimulate the Fed to raise interest rates in the new year three more times. If such expectations continue, then the dollar will continue to put pressure on the courses not only of emerging economies but also of the main ones.

Forecast of the day:

The currency pair AUD / USD is trading below the level of 0.7250. It can recover to this mark, but if it does not overcome it, then in the wake of the growing negative, it can resume its fall to 0.7165.

The currency pair USD / CAD is trading above 1.3345. If OPEC + does not make a clear decision to reduce oil production, the pair may continue to rise to 1.3480.