FX.co ★ Once again, the games of retail investors in Reddit with GameStop shares have collapsed the markets (we expect a resumption of the decline of the USD/CAD and GBP/USD pairs)

The renewed games with GameStop shares via Reddit brought down the US stock market again, and then this wave of negativity swept through Europe and moved to Asia today. What was it and what is the main reason for the growth of tension in the global financial markets?

Earlier this week, the head of the Federal Reserve, J. Powell managed to calm the financial markets, which led to an increase in demand for growth stocks-securities of industrial, commodity and other companies that were under pressure during the coronavirus pandemic. This led to a rise in the DOW 30 industrial index to new highs, and the US dollar was under pressure. But that's not all. The confidence of the head of the US Central Bank that the surge in inflation in the country will be limited and that the regulator is even ready to allow the economy to overheat for the sake of economic growth, led to the termination of the increase in the yield of treasuries.

But investors seemed to be concerned again about the resumption of growth in US Treasury bond yields yesterday, which caused a sell-off in the local stock market, which, in turn, was reinforced by renewed gambling through the Reddit platform with GameStop shares. Stock indexes fell, but not as critically as they did in January. In any case, today, before the opening of trading in Europe, there is a pullback in futures on European and American stock indices, and the local strengthening of the US currency has stopped. And the yields of treasuries are also adjusted downwards. So the yield of the benchmark 10-year treasuries after reaching a local high of 1.1614% adjusted downwards and at the time of writing it is at 1.1474%.

Whether activity on the Reddit platform will resume, as well as the growth in government bond yields is still unclear, but if this does not happen today, we can expect a rebound in both indices and a decline in the dollar in the Forex market.

In general, everything that is happening in the markets indicates that the situation in the markets remains extremely fragile. Even such an array of positive (and this expectation of a strong economic recovery in the Wake of the spread of vaccination of the population, and various measures to support economies, which is only expected stimuli in America, the total volume of 1.9 trillion dollars, as well as a frenzy of investors who try to buy almost everything, for fear that will not have time to jump into the last car of the train, moving to financial success) may not resist the realities of the strong growth of inflation in the United States, which wants or does not want the fed, force her to start measures of monetary policy tightening, this will eventually lead to a reversal in the stock markets and the beginning of a long-term strengthening of the US currency.

Forecast of the day:

The USD/CAD pair, after a sharp recovery yesterday, may resume its decline today if market sentiment improves and oil price growth recovers. In this case, the pair may fall to 1.2475 after falling below the mark of 1.2600.

The GBP/USD pair is trading lower on the back of rising demand for the US dollar and a decrease in risk appetite in the markets. If the pair is fixed below 1.3940, it may fall to 1.3855.