26.04.201901:50 Forex Analysis & Reviews: Bets on the euro's growth is out of style

The US dollar confidently passes multi-months highs. Thus, it challenges analysts who predicted the US currency's fall this year due to a change in the Fed's rhetoric on interest rates. The euro suffers from the absence of signs of a recovery in the eurozone economy, while it was predicted that it would take off. Bets on strengthening the single currency become irrelevant, and traders are urgently changing their positions. What's happening? Why did market participants suddenly fall in love with the dollar?

The fact is that now the US economy looks like a separate prosperous island in comparison with other countries of the world, which continue to publish disappointing reports. The contrast with the eurozone is most noticeable. Therefore, the EUR/USD pair's fall is caused not so much by the dollar's strength, as by the weakness of the euro, the rate of which goes lower with each output of macroeconomic data. Yesterday's portion of data pulled down the main forex pair to its lowest since the beginning of the year.

The fate of the euro will depend on two factors. First of all, from the path that the world economy will take. If it turns out that China will stand on its feet and help German exports and GDP, then we can consider buying the euro. It is worth considering that the new trade conflict can lead to zero recovery of China, and then a test of the euro at the level of $1.05 is not excluded. The next so-called key to the door of the EUR/USD's future may well be US inflation.

Despite the fact that the dollar is now confidently going up in relation to its main competitors, currency analysts stubbornly continue to doubt its long-term strength. Strategists still do not believe in the "American" rally, considering that the explosive growth that is currently taking place is associated with "the weakness of other currencies."

"The dollar looks good, but, according to our estimates, it will not be able to implement a confident bullish scenario," wrote currency analysts for Europe at the Toronto-Dominion Bank in London.

The Canadian dollar's plummet to its lowest since January 2019 in relation to the greenback occurred not because of the latter's strength, but in connection with the Bank of Canada meeting. The USDCAD pair's high of the day was 1.3519.

The markets were focused on the adjusted estimates of economic growth and inflation, as well as the regulator's position regarding future rate changes. The regulator lowered the forecast of GDP growth for this year from 1.7% to 1.2%, and also decided to abandon the policy focus on tightening policy, opening the way for the possibility of lowering rates. Such a statement was an additional signal that the USDCAD may claim to move above 1.40 in the long term.

As for the pound, it continues to slowly walk around two-month lows in the absence of news on Brexit. The economic picture in the UK is not as sad as in the eurozone, so the pound's deep failures on this background can not wait. On the eve, Theresa May reported that negotiations with the Labour Party were important, but at some point the differences are significant.

As you know, the risk of a hard Brexit is eliminated, so the undervalued pound now looks attractive for purchases.