The whole global markets consolidated all week on the wave of mixed economic statistics from the world's leading economies, as well as continuing hopes that the global economic recovery will actively take place this year amid the expansion of the vaccination process and incentive measures, which are used primarily in Western countries in one form or another.
Last Friday, investors began to actively buy company shares during the US trading session. Apparently, they received ironically positive news that the volumes of dollar liquidity will be maintained on a large scale, which will be poured in the currency markets. In this case, the further inflation process of financial bubbles will be stimulated, supported by the US administration and the Fed's active fiscal policy. This is not a concern for the markets, which means that the more the demand for company shares grows, the more the markets are excitedly waiting for an unprecedented inflow of liquidity in the amount of more than $ 1.5 trillion after Congress decides to approve the aid package at the end of this month.
These expectations remain very strong, which means that investors will continue to ignore the prospects of a strong inflation growth in the wake of stimulus, which will eventually force the Fed not only to stop buying bonds, but also to start the process of raising interest rates. This will cause the global stock markets to turn down. It can be recalled that the entire growth of the stock markets in the vast majority over the past 10 years was due to the pumping of the financial system with liquidity, and nothing more.
As for the prospects of the US currency, we believe that it is under clear pressure primarily against commodity and raw currencies. This is again due to the fact that the recovery of global economic growth will stimulate an increase in demand for oil and for commodity assets, primarily industrial goods.
However, there is one very important hindrance to the US dollar's significant weakening: the growth of the yield on US Treasury government bonds. This growth will force the US regulator to pay attention to the yield curve and ultimately change its monetary rate, which will support the dollar in global markets.
But these are just only future prospects that hover over the markets, so it is unlikely to affect them yet.
Today is a holiday in the United States – Presidential Day. The local financial market will be closed. Among the important economic data, the values of industrial production in the Eurozone will be published.
Forecast of the day:
The USD/CAD pair is consolidating in a wide range of 1.2625-1.2915. On the one hand, it is under pressure from the growth of crude oil prices, and on the other, the dynamics of the US dollar, which is not giving up due to the strong growth in Treasury yields. The pair declined to the level of 1.2660. If it breaks through it, it may further fall to 1.2625. But if this mark holds, the pair may rebound to the level of 1.2740.
The AUD/USD pair has almost reached the local high of 0.7800. Its price will likely test the level of 0.7740 before it tries to reach it again.