FX.co ★ Investors are tired of problems, they want to return to what it was before this year began

The previous week has shown that with the existing balance of negativity and positivity, investors chose positive news in the financial markets, which led to the continuation of the growth of stock markets and dollar's weakening, which partially lost all its growth, based on the dynamics of the ICE index at the end of the week.

It is clear that last week's main topic was the news of successful trials of Pfizer and BioNTech's vaccine against COVID-19, which made markets very enthusiastic and positive. In this regard, stock indices managed to pull up to recent highs despite the high volatility and in turn, the dollar declined. All this happened amid the absence of Mr. Trump's official recognition of Mr. Biden's victory in the presidential race. However, the markets ignored this news again, believing that in any case, the Democrats will put an end to Trump with media support controlled by them. In addition, it should be recognized that investors, weighing their personal benefits from the Trump presidency and future expectations from the Democratic rule led by Biden, give a clear preference to the latter, considering that his policies will favor the recovery of the US economy after the pandemic and stimulate the growth of asset values, primarily company shares.

The new week begins with the continuation of such market mood, which is reflected in the growth of stock indices and futures contracts for American and European stock indices. However, the reasons for growth are somewhat different in Asia – the process of concluding a large-scale trade deal between the countries of the region, where China is at the center of the process. But this topic, as well as the positive news presented above for the Western world, clearly fit into the general outline of investors' unwillingness to look at reports of COVID-19 cases once again. They believe that the production of vaccines, as well as mass vaccination of the population of Western countries, will return everything to normal and lead to the return of the way of life that was before 2020. Of course, time will tell how it will be, but as long as investors believe it, stock indexes will rise and the US dollar will weaken, losing ground in the face of falling demand for protective assets.

Looking at all that is happening, we believe that high volatility in the markets will continue with the general smooth upward trend in demand for risky assets and the dollar's weakening.

Forecast of the day:

The GBP/USD pair has partially recovered but is still below the level of 1.3300. A local downward reversal is likely, if the pair falls below the level of 1.3200. In this case, it will further decline to 1.3085.

The USD/JPY pair is trading above the level of 104.50. If it falls below this level, it will further decline towards 104.00.