The previous week was quite positive for the global stock markets. Investors focused on corporate reporting for the 1st quarter, which stimulated the growth of demand for company shares amid the full-scale support measures. Against the background of this optimism in the currency markets, the US dollar remained under pressure.
Last Friday, the US major stock indexes tested their maximum values again. This primarily applies to the DOW and S&P 500, while the NASDAQ 100 just returned to the local February high.
The existing reasons for this behavior on the market has been repeatedly pointed and its assessment turned out to be correct. Therefore, it can be expected that these factors will continue to push up stock markets, not only in the US, but around the world. This trend is also receiving additional support on the wave of stabilization in the yield of the US Treasuries, which has shown stability. Here, the yield of the benchmark of 10-year Treasuries has been moving in a quite narrow range of 1.60% -1.75% since last March, which noticeably affects the dollar's behavior.
Previously, the US dollar received significant support amid a sharp rise in government bond yields, which in turn, increased. This supports the expectations of a sharp inflation growth due to the strengthening of the economic recovery in the US, stimulated by various huge support measures. However, investor sentiment has significantly improved, which has led to an increase in demand for risky assets, after the Fed, represented by its representatives and primarily J. Powell managed to convince the markets that they have at least one more year not to expect changes in monetary policy. As a result, the US dollar, being the funding currency, was under pressure. This was manifested in the upward reversal of the exchange rates that are traded against it, as well as the gold's value.
Over the past week, Mr. Powell provided assurances to the market that everything was under control and that the monetary exchange rate would not change. This event, as well as good corporate reporting of companies, led to an increase in demand for companies' shares and as a result, increased pressure on the USD.
A slight increase in the ICE dollar index was observed before the opening of the European session trading today, which can be expressed in partial profit taking by market players. Despite this, we still expect the continued demand for risky assets, possibly after a slight correction, and the weakening of the US currency.
Forecast of the day:
The EUR/USD pair is trading in a short-term downward trend. If it holds above the level of 1.1860 and breaks through 1.1920, the growth will continue towards the 1.1985 mark.
Gold's price also has a growth potential. If it holds above the level of 1733.25, after breaking through the level of 1745.45, it is likely to rise further to 1757.45.