The global markets ended the previous week with a sharp growth in stock indices and crude oil prices, while the US Treasury yield and the dollar exchange rate weakened.
The recent American economic data shows that the country's economy continues to recover, and although inflation is rising, it is not yet critical.
Why do we always pay attention to the situation in the US economy and the Fed's behavior?
This is due to the fact that their influence on the global financial markets remains dominant. The American consumer remains the main one in the world despite all the existing problems. The demand for goods and services in this country is still the key driver in the world. In addition, the main export product – the US dollar is still in demand, and it cannot be otherwise due to the global financial system that has developed in the post-war period, where the United States and its national currency are at the center, like a spider in a web.
Therefore, investors' growing confidence that the US economy is in an upward cycle, and the inflation growth does not yet threaten the Fed's course of monetary policy and the Ministry of Finance's view that there is no need for stimulus measures, support the demand for risky assets, which primarily include company shares. However, the overall positive mood also extends to commodity markets. For example, the prices of crude oil of both major brands WTI and Brent broke out of a three-week period of consolidation and settled again together above the level of $ 60 per barrel.
As for the currency market, the US dollar was under pressure against all major currencies. The commodity currencies actively rose last week. In turn, the euro and the yen also increased well. The main reason for this dynamics is the sharp decline in the yield of US government bonds, which is taking place amid a decrease in tensions among investors, caused by earlier fears that the Fed will be forced to start tightening its monetary policy in the wake of the expected strong rise in Treasury yields.
Assessing the current situation in the markets, we believe that the general dynamics of the previous week will remain the same for the current one.
Forecast of the day:
The EUR/USD pair remains in the range of 1.1945-1.1985. We expect it to break through the upper border of the range and move immediately to the level of 1.2030.
The USD/JPY pair continues to decline amid the general weakness of the US dollar. We believe that a price decline below the level of 108.35 will lead to its further fall to 107.75, which will correspond to a 38% pullback on the Fibonacci.