The markets around the world managed to positively complete the quite difficult past week. The stabilization of Treasury yields and the US dollar rate supported the optimistic mood of investors, although the Fed's Chairman J. Powell surprised the market with his comments.
The previous week turned out to be eventful due to the publication of important economic data. It fully showed that all of Powell's earlier statements that the regulator will not rush to change the monetary rate amid the influence of increased inflationary pressure can be corrected at any time. This correction will begin with a decline in the volume of government bond repurchases, and according to him, the process will be held as soon as possible.
As a result of this news, stock indices noticeably declined, which turned out to be local and was replaced by a sharp growth last Friday. The reason lies in the fact that the markets fully shifted their attention to the recovery processes in the US economy in particular and in the world economy in general. In fact, investors got what they wanted – the Fed would act logically based on the actual situation.
In terms of the currency market, the US dollar ended the week on a positive note by consolidating above 92.00 points on the ICE index. Now, it is at the level of 92.862 points. It can be recalled that the primary reason for its strength is the long-term expectation of a change in monetary policy in the US in view of the recovery process, and then the growth of the country's economy.
Assessing the general outlook, we believe that the overall positive sentiment in the markets will continue, as the vaccination process in the economically developed countries of the West is progressing, albeit slowly. It is worth noting that this is the main factor supporting these sentiments.
If we consider the current situation, a mild growth with some local pullback is likely to continue in the market. In terms of the dynamics of the dollar exchange rate, it will depend on the incoming economic data, primarily inflation and labor market indicators. This week, the market will focus their attention on the publication of US employment data, which will shock the markets again.
Forecast of the day:
The GBP/USD pair is trading below the level of 1.3770. If it fails to rise above it, the decline will continue towards 1.3665. The breakdown of which may be the reason for the pair's continuation of growth to 1.3865.
The USD/CAD pair remains in a short-term upward trend. The continuation of decline in crude oil prices and the overall positive dynamics of the US dollar rate may allow the pair to further rise to the level of 1.2680. However, it should break through the level of 1.2630 first.
