The prevailing apocalyptic mood in the markets has not yet disappeared, but it does not have a significant impact on investor sentiment. The US dollar is receiving local support amid technical oversold and market focus on the impact of the coronavirus pandemic on the global economy in the coming months.
On the other hand, Fed members' recent comments are not yet encouraging and are full of phrases that "the US economy, as well as the global economy, will be weakened in the near future." The IMF predicts a 3.0% decline in the global economy this year, while it expects it to grow 5.8% next year, while market volatility is projected to increase above a decade's average. But amid the "black" news and negative forecasts, in our opinion, there are sprouts and future significant growth of equity markets not only in developed economies, but also in developing countries.
Assessing the inhibition of the spread of the pandemic, we believe that the number of infected in North America and Europe will drop markedly in May while maintaining the current dynamics. We believe that after stabilization of the situation in the markets, which is already happening, we will witness a revival of investor interest in company stocks by May. Of course, the reporting season for the first quarter will show a significant drop in profitability. But at the same time, the revival of economic activity will already lead to a recovery in the growth of company income in the second quarter. Therefore, we expect that the present moment is the period when it is necessary to form investment portfolios in the shares of companies.
In the currency market, an explosive fall in the dollar in the near future is not expected, which is so far constrained by the factor of the negative generated by the consequences of the pandemic. It is likely that before the end of this week, on the contrary, there will be a strengthening of the exchange rate of the American currency against the background of its local technical oversold. But in general, our general forecast for its course remains the same. We believe that its decline will continue primarily against commodity currencies in the wake of a recovery in demand for commodity and commodity assets due to the restoration of economic activity in China, Europe and the United States.
The meeting of the Central Bank of Canada on monetary policy can be considered as one of the most important events of the day. The bank is expected to maintain interest rates. We also believe that the short-term forecast of the regulator on the prospects of the Canadian economy will be slightly negative. We are confident that, in general, the final decision will not have a noticeable effect on the dynamics of the Canadian currency.
In addition, investors will pay attention to the publication of data on retail sales, as well as their volume and industrial production in America. Negative values are expected to be expected, but if they turn out to be slightly better than forecasts, this will lead to positive dynamics in the US stock market and a weakening dollar in the currency markets.
Forecast of the day:
The USD/JPY pair found support at a strong resistance level of 107.00. If it stands, the pair will turn up and move to the level of 109.30.
The USD/CAD pair is correcting upwards, breaking through the level of 1.3935, which may serve as the reason for its local growth to 1.4080. The main negativity for the pair is the correction in the oil market, as well as the expectation of the outcome of the meeting of the Central Bank of Canada. But, despite this, we believe that the pair should be sold again from the level of 1.4080 with its likely decline to 1.3800.
