Dollar hit an almost two-week low on Tuesday as growing optimism about global growth dampened demand for the safe-haven currency. Meanwhile, the euro jumped amid strong forecasts from the International Monetary Fund (IMF), according to which the world economy will grow by 6% this year and 4.4% next year as a result of massive government stimulus and fast vaccination.
And since investors decided to abandon low bond yields and shift to risk assets, Italy and Portugal decided to prepare more attractive debt securities. Italy is reported to be offering 50-year bonds, while Portugal is expected to sell 10-year bonds.
There are also rumors that Mario Draghi, Italy's new prime minister, plans to issue 100-year government bonds to help the economy recover from recession. This is in response to the ongoing problems the country is facing, especially since the issuance of the EU recovery fund is delayed.
To date, the longest bond in Italy is a 50-year security issued in 2016, which currently yields around 2%.
As for Portugal, many analysts view the placement of bonds as a purely symbolic measure, since the country recently applied to the IMF for a relief package. To add to that, the yield on its 10-year bonds is 0.24%.
Going back to the euro, demand also jumped because of the ECB's opinion that the EU economy will recover much faster after the pandemic. But investors should be prepared in case central banks do not mitigate stimulus measures, especially if their target levels are not met yet.
"When we emerge from isolation, many conditions will be met for further sustainable recovery. But if it is not enough, the regulator may resort to even more stimulus measures, "Pierre Wunsch said.
In the meantime, the key level in EUR / USD today is 1.1895 and a break above it will set off a larger jump towards 1.1930 and 1.1990. But if the quote returns to 1.1850, the euro may drop to much lower price levels.
With regards to the UK, the IHS Markit will publish the results of its comprehensive PMI survey today, followed by the data on composite index. Then, in the afternoon, minutes on the Fed's meeting will be released, as well as on the IMF and G20's summit.
That being said, the key level in GBP/USD today is 1.3815, so a break below it will result in a sharp collapse towards 1.3760. But if the quote returns to 3863, the pound may climb to 1.3920, and then to 1.4000.