On Monday, financial markets revived amid new reports from the United States that tests of the ongoing trials of a new vaccine against COVID-19, according to media reports, are quite successful.
Also yesterday, financial markets received a new batch of optimism amid reports of active trials of a new vaccine against coronavirus. This, together with the ongoing process of gradual exit of economically significant countries for the world economy, supported the growth of demand for risky assets, which is also supported by hopes for even more significant incentive measures from the world Central Banks. Of course, we should expect a weakening of the US dollar in this situation, which, in fact, happened. Even immersed in the problems of COVID-19 and the revival of unsuccessful negotiations on Brexit between the EU and Great Britain, the pound unexpectedly received support. This dynamics in the currency market and not only in it, but also in stock markets and the commodity market, paired with the behavior of government bonds, indicates that the focus is still on the situation with COVID-19 and the exit of world economies from the pandemic.
It can be assumed that if the tests turn out to be positive, and the probability of a second wave of the pandemic turns out to be ruined, this will lead to a strong increase in demand for stocks of companies, higher prices for crude oil and, of course, to weaken the dollar, which is potentially in the wake of massive incentive programs from The US Treasury and Fed have the most significant potential weakness. For the last time, its rate has been maintained only due to the situation around COVID-19 and the demand for it as a safe haven in critical situations.
Today, the dollar continues to decline in the Asian trading session. We expect that this process will continue in both European and then American sessions.
On the other hand, an important event happened yesterday which was the news that France and Germany proposed the creation of a recovery fund for the eurozone in the amount of 500 billion euros, which will provide grants to the regions of the eurozone affected by coronavirus. On this wave, the euro received significant support, which was only reinforced by positive news about the next trials of a new vaccine against COVID-19.
We expect that amid rising futures for European and American stock indices, the dollar will most likely continue to decline today.
Forecast of the day:
The EUR/USD pair remains in a wide range of 1.0770. It is likely to continue local growth to its upper boundary of 1.0990 - 1.1000.
The USD/CAD pair is falling amid a critical fundamental "weakness" of the US dollar, as well as rising crude oil prices. We believe that its decline will continue to the level of 1.3845 after breaking the level of 1.3900.
