FX.co ★ The weakness of the dollar is determined by the expectations of US statistical data, but the bottom will be reached soon

The US dollar is in a tight spot on Friday. On the one hand, the US currency has enough reasons for confident growth, but on the other hand, its growth is quite limited.

Paired with the euro, the greenback was losing ground, which was facilitated by the expectations of the release of statistical data from the United States by investors. By the time this material was prepared, the EUR/USD pair had risen to the level of 1.1362. At this moment, the USD/JPY pair rose to 115.19. The dollar exchange rate against a basket of six major currencies was trading 0.1% lower today in the morning, at 95.740. However, in the second half, the dollar index found the strength to grow and pulled up to 95.80.

One of the reasons for the dollar's uncertainty is the publication of data on the number of real estate purchase and sale transactions on the secondary market in the United States. According to most analysts, in January, this indicator decreased by 1% compared to the results of December, that is, it reached the level of 6.1 million.

Another reason is the unexpected risk sentiment in the forex space, formed due to some weakening of geopolitical tensions. So, on Thursday, US Secretary of State Antony Blinken said at a meeting of the UN Security Council that he had sent a letter to Russian Foreign Minister Sergey Lavrov with an offer to meet next week. Lavrov responded to this proposal with a counter-proposal to hold a personal meeting closer to the end of next week.

This news about the holding of diplomatic negotiations was received by the market with a degree of optimism. However, it is fair to say that the situation around Ukraine remains extremely tense. A new portion of alarm arose after on Thursday the Ukrainian government forces and the unrecognized republics in eastern Ukraine suddenly began to accuse each other of violating the ceasefire.

Western European countries and the United States have expressed fears that Russia may use this almost decade-old conflict as a pretext for war. The Russian authorities, in turn, said on Thursday that they were very concerned about the intensification of the conflict in Ukraine and could not help but monitor the situation there.

The bidders will leave for the weekend with a lot of questions and a very blurry picture of geopolitical tensions. It is this continuing uncertainty around the ongoing diplomatic negotiations that should serve as support for the dollar. Based on this, we expect any weakness of the dollar only in the very short term. The US currency index has almost no chance of breaking 95.50 in the near future

Today, the markets will hear speeches by Charles Evans, Christopher Waller, John Williams, and Lael Brainard. Recall that yesterday James Bullard once again reminded me of the importance of raising interest rates in the United States. If today's speakers also advocate for a faster tightening of the PEPP, then the markets will return to speculation about a 50 basis point rate hike in March. Yet in the last few days, this prospect has been partially and gradually fading away.