18.05.202211:11 Forex Analysis & Reviews: Is the local rally in the markets over? What's next? (we expect a local corrective depreciation of the dollar)

The three-day pullback in the stock markets, caused by the markets playing back all the recent negative factors, as well as the expectation of the Fed's rate hike prospects, may pause while investors follow the publication of important economic data and digest the words from yesterday's speech by J. Powell, the head of the Fed.

After the strongest sell-offs of recent weeks on the stock markets, a powerful pullback has been observed over the past three days against the background of a significant reduction in short positions and purchases of company shares, as evidenced by stock exchange data. The reason for this dynamic was: the markets playing back all the negative factors that have been recent - these are interest rate hikes by the world Central Bank, rising inflation, and the risks of the global economy falling into a deep recession hole. The positive was yesterday's speech with a comment by Powell, who said that plans to raise interest rates in July and June by 0.50% are not mandatory. In addition, he said that there is a high probability of a "soft" landing of the American economy and that the cessation of inflation growth could serve as a signal to stop raising rates.

In this regard, the publication of fresh data on the consumer price index in the eurozone today will be of great importance. According to the consensus forecast, in annual terms, consumer inflation should slow down to 7.5% in April, which will correspond to the March value. It is assumed that the April inflation value will show a stronger decline in growth to 0.6% against the March growth of 2.4%. If the figures do not disappoint and turn out to be no higher than expected values, it will be possible to assume a strong growth in the European stock market on the wave of hopes for the ECB's interest rates to remain at zero. But this, in turn, will put pressure on the euro, which is highly likely, paired with the dollar, to rush back to the recent low in the area just below the 1.0400 mark.

Today, the values for consumer inflation in Canada will also be released, where its growth rate is also expected to slow down. Confirmation of this forecast may lead to a local weakening of the Canadian dollar.

From the data of American statistics, we will highlight the publication of the values of the number of construction permits issued in the United States and the volume of new homes. Positive values of indicators can support the demand for shares of American companies.

In general, observing the situation in the markets, we believe that a lot of investor sentiment will depend on the statistics listed above. If they come out in line with forecasts, the weakening of the dollar may resume again after the correction, and the demand for company shares will grow again.