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Following the results of Tuesday's trading, world stock indexes sharply declined amid the ongoing COVID-19 pandemic in Europe and the United States. The shares of companies that are highly dependent on this situation, such as tourism, airlines, as well as enterprises that produce aircraft equipment, and companies in the financial sector, came under considerable pressure.
Against this negative background, the US dollar received support in the currency market, despite the weakening in Treasury yields. The ICE dollar index managed to consolidate above 91.00 points, and was at the level of 91.20 points earlier.
It is possible that the observed pullback of the dollar rate on the currency market is just local. So far, we can hardly expect its noticeable strengthening. The pressure on it may be exerted by the publication of positive data on the US economy this week.
It should be recalled that the values of sales in the American housing market and the index of business activity in the manufacturing sector and the service sector will be released on Thursday and Friday. All the indicators are expected to increase. If so, this will be a good reason for the dollar's local downward reversal against major currencies, since the main negative reasons for it still exist and have not gone away and as a result, this will restrain its potential to grow.
In response to Senator R. Scott, Fed Chairman, J. Powell, once again confirmed his and the Fed's expectations of strengthening economic growth in the country, despite the terrible situation with COVID-19 and the slowing employment growth in the economy. The Central Bank leader reiterated that it is very important that the growth of inflation this year will not be critical and will slightly rise above the usual level for recent years. Thus, he made it clear that the regulator will not change its monetary rate, continuing to support the national economy. This means that the current wave of negativity in the markets will be a temporary phenomenon and purchases of risky assets will resume this week, with a simultaneous weakening of the US dollar.
Forecast of the day:
The EUR/USD pair is trading above the level of 1.2000. It could correct to 1.1995 before further rising. We believe that the ECB's final decision on monetary policy on Thursday will not have a noticeable impact on the overall dynamics of the pair. If it holds above the level of 1.1995, we can expect it to turn up and resume growth to 1.2100.
The GBP/USD pair found support at the level of 1.3910. Today's publication of positive data on the UK economy supports the pound. Its growth against the dollar may intensify if the general mood in the global markets strengthens. In this case, we expect the pair to continue rising to the level of 1.4000.
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