The US dollar was under a noticeable negative impact last week amid the decline in Treasury yields and their subsequent stabilization, which overshadowed investors' concerns that US inflation would sharply increase this spring, although this has not yet been observed. On this wave, the Fed will be forced to change its monetary rate.
According to the dynamics of its ICE index, the US dollar declined against the basket of major currencies at the end of the previous week, but still remains above 90 points.
During that time, the US NASDAQ and S&P 500 indices added to the stock markets, while the DOW industrial index fell a little bit. In general, they all updated the new levels again. As noted earlier, such dynamics is formed due on one hand, to the decreasing fears among investors that the Fed will change the course of monetary policy in the near future. Here, the main indicator is first a decline in Treasury yields, and then their stabilization. On the other hand, there are massive support measures from the Ministry of Finance and the Fed for both the country's economy and its citizens.
Analyzing the current situation, we believe that our prospect this week on maintaining the general dynamics on world markets should remain unchanged. We believe that the US dollar will remain under pressure against the basket of major currencies. Meanwhile, the world stock markets, especially the US one, will try to grow. This will be stimulated not only by the above-mentioned support measures from the US and Europe, but also by the incoming positive data on the US economy. Last Friday, the values of business activity indices in the manufacturing sector and the service sector were presented, which were higher than expected.
This week, the market will focus their attention on the result of the Fed's monetary policy meeting and on J. Powell's press conference. Investors will be interested in the assessment of the dynamics of American inflation by the regulator and its head personally. In addition, the key events will be the publication of GDP data from the US, Germany, Euro Area, and Canada. As for the outcome of Japan's Central Bank meeting, we do not expect it to make any significant impact on the market and on the rate of Japanese yen.
Most likely, the current week will be positive for the stock markets and negative for the dollar.
Forecast of the day:
The EUR/USD pair is making a downward correction after reaching the local high of 1.2115. We consider it possible to resume its purchases after a decline, approximately from the level of 1.2080 with a likely increase to 1.2115, and then to 1.2175.
The GBP/USD pair is below the level of 1.3910. Its breakdown will lead to the pair's growth first to 1.3950, and then to 1.4000.