08.02.202111:39 Forex-elemzések és áttekintések: Prospects of higher inflation in US to affect USD

The US currency continues to surprise the markets, rising after a decline last week. Traders and investors are cautious about USD, fearing that the next economic data in the US may undermine the position of the greenback.

On Monday, February 8, the US dollar remains stable against most of the major currencies, posting moderate gains. Last week, the US dollar rise was limited by the disappointing jobs report from the US. Experts are sure that USD will need stronger economic data and significant progress in the fight against COVID-19 in order to develop further growth.

This week, traders will be focused on the inflation rate in the United State in January. The US Labor Department is due to publish the report on Wednesday, February 10. According to analysts polled by Trading Economics, inflation in the country accelerated to 1.5% year-on-year. On Sunday, February 7, Janet Yellen, the US Treasury Secretary, said that the US economy could return to full employment next year if the stimulus package worth $1.9 trillion was approved.

The adoption of the stimulus package proposed by US President Joe Biden is one of the key factors that will determine the future dynamics of the greenback. Negotiations over the fiscal measures caused noticeable volatility in global markets. The US dollar also gains support from rising yields of the US Treasuries. On February 8, ten-year Treasury yields increased to 1.186% per annum. The rule is that higher Treasury yields are favorable for purchases of USD.

Currently, the American dollar is strengthening against the euro, the yen, and the pound, following the rise of the US Treasury yields. On Monday, the EUR/USD pair was trading in the range of 1.2026-1.2027, testing new highs from time to time. A short pause in the market resembles the calm before the storm, thus keeping the US dollar from a reversal.

Notably, the US Treasury assumes that there might be another round of inflation when the $1.9 trillion package is approved. Increased inflation risks undermine the position of the US dollar, keeping investors on edge.

At the moment, the US currency is moderately rising but is still at risk of losing balance. Many experts consider the uptrend in USD to be unstable. The dollar is likely to reverse to the downside and test new lows at any time. As for now, the greenback has taken a short break to determine its future direction.