The US dollar has started a new trading week quite calmly, but this could mislead traders. Analysts suppose that the greenback may show a sharp movement in the pair with the euro.
Last week, the US currency was rising amid announcements made by Jerome Powell. He said that the Fed might start the tapering of the QE program in the foreseeable future. At the same time, the regulator postponed the date of the first key rate hike, thus surprising market participants. Notably, the US Fed is sure that it is possible to raise the benchmark rate four times until the end of 2023. As a result, both the US dollar and government bonds yields showed a jump.
Some analysts think that the greenback is increasing its potential ahead of a switch to a tighter policy. The current month is considered the most difficult for the global stock market. As a rule, in October, the euro/dollar pair slumps more than other assets. This time, the US dollar remains neutral. Early today, the euro/dollar pair was trading at 1.1641, making an attempt to leave the current range.
At the end of the previous week, the level of 1.1600 acted as a stumbling block for the pair. On October 1, the price inched up to 1.1590 and 1.1606.
The US dollar advanced against quite strong macroeconomic data. In August, the ISM manufacturing PMI advanced to 61.1 points from 59.9 points, whereas the personal consumption expenditures price index increased to 4.3% from 4.2% on a yearly basis in the given period. At the same time, core PCE remained at 3.6% year-over-year. However, experts emphasize that the greenback almost ignored the data.
The US dollar may lose its safe-haven status amid the global economic recovery. Most investors choose other assets, thus pushing down USD. The currency may also lose support if the Fed decides to go on with its ultra-loose monetary policy. At the same time, market participants are concerned about possible changes in the Fed's approach. Almost the same situation occurred three years ago, when the regulator increased the key interest rate. The central bank has to raise the benchmark rate amid high inflation. As a result, the carry trade strategy becomes very popular, thus depreciating the US dollar.
A rise in the US dollar and government bonds yields has a negative influence on the stock market. Tightening of the monetary policy is the key issue at the moment. What is more, the global economy is rapidly recovering. That is why safe-haven assets, in particular USD, are losing attractiveness.