The mood in the financial markets has clearly improved amid reports from China that local scientists have developed an effective medicine against coronavirus, as well as news that the PRC is halving trade duties on US $ 75 billion worth of imports in line with January trade agreements.
It seems that this week is a turning point for global markets in the wake of positive news from the world. As a result of trading on Wednesday, global stock markets significantly increased. This positive trend continued at Asian trading on Thursday, where the region's major stock indexes add about 2% or more at the end of trading. Of course, the news from China about its decision to reduce trade duties on US imports became the reason for today's positive. In addition, published data from Europe and the United States contributed to the growth of optimism yesterday and today.
On the other hand, indices of business activity in the services sector in Germany, the eurozone, Britain and the United States showed good growth, which allowed investors to switch from local problems of coronavirus and the risk of inhibition of the Chinese economy to the purchase of previously fairly cheaper shares of companies. Economic data vividly demonstrated that the fears of a slowdown in business activity in economically strong countries that existed last week disappeared like morning fog.
In addition to performance indicators, employment values from ADP in the States were published on Wednesday, which were significantly higher than forecasts, demonstrating an increase of 291,000 new jobs in January against December revised downward figures of 199,000 and expectations of a decrease in the number of jobs to 156,000 .
Moreover, unexpectedly good data led to an increase in the ICE dollar index on Wednesday, and against this background, the main euro / dollar currency pair lost half the figure, declining below the level of 1.1000. At the moment, it continues to trade just below this level. An additional negative for the euro was yesterday's statement by the head of the ECB C. Lagarde, who made it clear in her comment that uncertainties related to the geopolitics and business environment are a negative for the eurozone economy. She also mentioned the situation with coronavirus. In general terms, her speech was "dovish" and was not full of any signals about the probability of a regulator changing the exchange rate in the foreseeable future.
At the same time, the dollar received support not only thanks to strong figures from ADP, but also from the decision of the US Senate not to support the impeachment of D. Trump.
In general, as we evaluate the general positive moods in the markets, it can be argued that if they persist, then stocks of companies and assets of the commodity market will continue to be in demand. At the same time, quotes of the Japanese yen, franc and gold will remain under pressure. We also expect that the single currency and pound will be consolidated over a wide range.
Forecast of the day:
EUR/USD is trading above the level of 1.0990 which can be corrected up to 1.1025. We consider it possible to sell it from this level either after a decrease below the level of 1.0990 with a local target of 1.0950.
Gold is trading above the level of 1550.50. Rising demand for risky assets, as well as probably strong Friday employment data in the United States may put pressure on gold quotes. In this case, it, falling below the level of 1550.50, can led to a decline to 1535.00.