06.04.202111:42 Forex Analysis & Reviews: Dollar slides amid risk sentiment

The current maneuvers of the US dollar have alerted traders, fearing its further decline. The greenback headed to the negative zone, despite the relatively good start of trading.

At the beginning of the trading session on Tuesday, April 6, the dollar demonstrated success, moderately rising against the euro and the yen. At the start of this week, investors continued to win back the statistics on business activity in the US services sector. Recall that the March indicator showed a sharp increase to 63.7% from 55.3% in February. The EUR/USD pair was trading near 1.1816-1.1817 on Tuesday, rising steadily amid a recovery in demand for risky assets.

According to JP Morgan analysts, the information on the decline in the unemployment rate in the United States was the catalyst for the rise in risk sentiment in the market. Experts believe that this triggered the greenback's slide into a downward spiral. At the same time, the EUR/USD pair retains the growth potential, although the ECB's ultra-loose monetary policy and the strengthening of the quantitative easing (QE) program do not allow the tandem to turn around.

Experts have recorded a decline in the USD against the EUR since the beginning of this month. Note that the strengthening of risk appetite often provokes a weakening of the greenback, which is currently observed. Given the strong data on the US labor market and the highest indicators of activity in the service sector in recent years, we can say that the lion's share of optimistic forecasts is embedded in the quotes of the USD.

According to experts, the USD quotes take into account the upcoming growth of the economy and the yield of government bonds. Therefore, the new incentive programs do not benefit the dollar and do not contribute to its growth. According to analysts, the implementation of the "Biden plan" had a negative impact on the dollar. For USD buyers, the prospect of injecting an additional $2 trillion into the economy turned out to be extremely unfavorable. Despite the claims of the Biden administration that high spending is offset by higher taxes, this did not add to the market's optimism.

Meanwhile, economists stressed that tax increases will affect ordinary Americans, and this will provoke inflation in the long term. Ongoing concerns about the US budget and the USD have led to a weakening of the latter and an explosion in demand for risky assets.

In this situation, experts consider the sinking of the greenback to be natural. However, there is still hope that the trend towards strengthening the dollar is not over yet and that it still has room for maneuver.