The world markets continue to wait for the future development of new dollar liquidity, which is expected with the approval of the US Congress at the end of this month.
This is really an important factor that has recently stimulated demand for company shares and commodity assets, along with the process of vaccinating the population and the expectation of a speedy recovery of the global economy, primarily in the West. In this situation, the US dollar remained under pressure, but at the same time, continued to stay above, which was largely supported by a sharp increase in the yield of treasuries in the wake of the sell-off in the government debt market.
Previously, it was indicated that the optimistic state in the markets has reached the top. However, the market began to be aware that demand has slowly disappeared amid the lack of new impulses to grow. As a result, there was a partial profit-taking, which led to a local decline in global stock indices.
The situation in the currency market remains ambiguous. On the one hand, the US dollar is gaining support in view of a sharp rise in the yield on US Treasury government bonds – yield on 10-year Treasury benchmark surged yesterday, which is now above the 1.3% level. This shows a noticeable movement towards pre-pandemic levels. On the other hand, Fed's massive stimulus measures and the US government's fiscal support, prevented its growth. In fact, we continue to monitor the contest of strength between the US dollar and other major currencies, which affects both the sharp local growth of the dollar rate and its decline.
Gold, in turn, is a clear outsider in the situation. It declined yesterday against the US dollar, and is now below $ 1800 per ounce. Apparently, this movement is due to the fall in demand for gold as a protective asset, which caused its last year's strong growth, as well as the dollar's strengthening amid a sharp increase in Treasury yields. Assessing the prospects of this yellow metal, it is expected to continue to decline after falling below the 1790.00 level.
As for the stock markets, we expect its growth to resume in the near future. However, it is also possible that the correction that already started may continue due to the lack of new growth impulses. It is difficult to say how deep it will be. Everything will depend on the decision of the major players to continue taking profit or not.
The dynamics of the dollar exchange rate is also likely to remain balanced above the 90-point mark on the ICE index this week.
Forecast of the day:
The EUR/USD pair is trading at the level of 1.2080. A breakout of this level will lead the pair below, that is, towards 1.2015.
Gold is consolidating above the level of 1790.00. If it declines from this level, it may further fall to 1767.00.