The US dollar stopped weakening in the currency market, but we cannot say yet that it may start receiving noticeable support again.
The published minutes of the Fed's March meeting on monetary policy on Wednesday confirmed that the regulator does not plan to change anything in the near future. It will keep the volume of government bond repurchases, as well as all the parameters of monetary policy, unchanged.
However, the market did not react to this news, as it just simply stated what J. Powell and a number of FRS members talked last month. The government bonds also did not noticeably change its behavior. The yield on the benchmark 10-year Treasuries actually stayed under 1.7%, and its recent dynamics has been decisive for the US dollar's behavior.
Looking at the situation in the world markets, we can identify several of the most important factors that are long-lasting and seem to remain for quite some time. The first factor is the impact of the COVID-19 in Europe, where one lockdown follows another, which has a serious negative impact on the economy of the country. Investors understand that someday this chaos will end, and they will be able continue to buy shares of European companies, but so far, such a thing is far off. The second one is the vaccination process in economically developed countries, which is happening unevenly. If America has already vaccinated about 200 million people, then Europe has a clear shortage of vaccines.
The third reason, which significantly affects world markets and the US dollar, is the dynamics of Treasury yields. Assessing what is happening, one gets the impression that the US government debt has frozen at a certain point of bifurcation after the sales this winter and in March. Government bond yields rose to local pre-pandemic highs, but they are not going to decline, despite the regular statements by Fed members and personally its head Powell that monetary policy and the volume of government bond repurchases will be maintained until the US economy makes steady growth.
Investors in the debt market are aware that if the economic situation changes in the direction of its sharp growth, the Central Bank will not hesitate to change the parameters of monetary policy, starting with the termination of the purchase of Treasury bonds. Thus, this will hit those investors who either do not have time to leave these assets, or expecting that the current condition will continue for a much longer period of time.
The established balance in the markets is noticeably strong in the dynamics of crude oil prices, which simply moves in narrow ranges, after reaching local highs for almost a whole month.
All this clearly indicates that both negative and positive factors affecting the markets simply balance each other, and it is not easy to say when this process will end.
Forecast of the day:
The EUR/USD pair hovered below the level of 1.1880. If it fails to break through this level and consolidate above it, then a local reversal and decline to 1.1800 will be likely. But in case of growth above 1.1880, it can lead the pair further to 1.1945.
Spot gold is consolidating in the 1730.00-1745.45 range. If the price moves above the level of 1745.45, then local growth to 1755.00 will be possible.