COVID-19, which puts pressure on the risk appetite of investors, continues to strongly affect the currency market, just like any other financial markets. Nevertheless, this process is actively limited by the strong growth of hopes that vaccines from Pfizer in collaboration with BioNTech and Moderna will positively change the COVID-19 situation in the near future.
This week has been generally quite volatile, despite the fact that news about vaccines contributed to the growth of company shares' demand and to the reduction of investors' interest in protective assets. However, it should be recognized that these processes were not vague. Moreover, US government bonds only increased its demand, which is ironic, while the US dollar and other safe-haven currencies were under some pressure. In a normal situation, growth in investors' interest in company shares leads to a drop in demand for government bonds, which happened last week after Pfizer and BioNTech announced their vaccines. It is likely that this trend is observed primarily due to investors' awareness of the fact that the vaccine will start being in use only next year, and this is too long.
In the currency market, the overall outlook remains unchanged. According to the dynamics of the ICE index, the US dollar is still under pressure, but it did not sharply decline after the vaccine reports. So, it is kept in the range of 92.20-92.55.
On another note, it was announced today that the EU proposed for a Brexit without a deal. This caused the pound to be under pressure, but its decline against the dollar stopped at the level of 1.3222. However, we expect it to decline further as soon as the European session opens. The euro currency also turned out to have limited growth at 1.1890, due to long-term Brexit issues and Ms. Lagarde's statements that the impact of the COVID-19 in the eurozone will persist for some time.
All other major currency pairs are showing similar behavior, indicating that the current condition is likely to continue until this week ends.
In terms of today's interesting events, we can consider the EU summit, speeches by the ECB President, C. Lagarde, and Fed member, Mester. From the statistics, the numbers of initial applications for unemployment benefits, the index of manufacturing activity from the Federal Reserve Bank of Philadelphia and US sales in the secondary housing market will attract attention.
Forecast of the day:
The EUR/USD pair is above the level of 1.1840. A further decline will lead the price to the level of 1.1800.
The GBP/USD pair is trading above 1.3222. If this level breaks down, the price can further decline to the level of 1.3120.
