By the end of this week, the US currency was a little exhausted and was at a crossroads. Before the meeting of the Federal Open Market Committee (FOMC), it is difficult for greenback to decide on the direction.
The US currency is cautious in the market, moving from a small drop to a short-term rise. On Thursday, March 11, the greenback fell to a one-week low after the release of relatively weak data on consumer prices in the United States and against the background of a reduction in the yield of treasury government bonds. This morning, the "American" relative to the "European" was near $1.1932, having sank by 0.2% compared to the previous session. In the future, the EUR/USD pair cruised in the range of 1.1965 - 1.1966, trying to determine the direction ahead of the FOMC meeting.
Another important event today is the ECB meeting, the results of which may affect the dynamics of the euro. Many experts believe that the regulator will signal the suspension of further growth in bond yields. It is worth noting that the current rise in yields may negatively affect the economy of the euro block. At the moment, the ECB does not have powerful tools either to counter rising yields or to support the economy. Accelerated bond buying is not a help to the European economy, although such measures somehow affect the euro exchange rate.
Experts also note a number of contradictions in the dynamics of US Treasury bond yields. On the one hand, bonds grew steadily against the background of positive expectations from the Fed's soft monetary policy. The market expected that the budget incentives initiated by the US authorities would help to increase inflation. The yield on 10-year US Treasury bonds was 1.528% after reaching an annual high of 1.626%, recorded last week.
On the other hand, these yields have now stopped growing, which has caused an imbalance in the US currency. The greenback is stuck between the upward trend and downward trend, experts emphasize. They are confident that the current US Treasury bond auctions will determine its immediate future.
Stronger demand for US government bonds slowed the growth of the US currency. According to experts, auctions for 10-year and 30-year treasuries will be crucial for USD. The last one is scheduled for Friday, March 12. If high demand is recorded at the end of the auctions and yields fall, then the EUR/USD pair is expected to consolidate. At the same time, analysts believe that the dollar rally may stop. However, with weak demand for US treasury government bonds, there is a high probability of a new wave of USD growth, experts conclude.
