The US stock market suffered from new shocks on Monday. The local stock market was under pressure amid news about the default of the largest US hedge fund Archegos Capital Management. And although the DOW index managed to be optimistic at the end of trading, an unpleasant aftereffect remained.
In view of these events, fears have returned to the market that real financial problems may be not only for this company, but also for others who may exceed their limits in the race for profit, which will cause a margin requirement and as a result, cause the release of large blocks of shares to the market with disappointing prospects of its collapse across the entire profile.
In terms of the currency market, this news did not affect it in any way. It just continues to consolidate. The only victim, which was not related to the US stock market events, but to the continuation of growth in Treasury yields, was gold's price, which left the range it had been staying for the last three days. According to the reverse banking method of calculation, it can be recalled that sale of US Treasury government bonds leads to an increase in their yield. This already has a negative impact on gold quotes, since the growth of profitability supports the US dollar exchange rate.
Overall, it is clear that the current situation indicates that investors' still lingering fair optimism keeps the markets from declining. The hopes that the global economy will continue to recover and then grow outweighs all the issues about COVID-19 and the related lockdowns in Europe, which are coming one after another. It can be argued that as long as such sentiments persist, stock markets will slowly rise. Meanwhile, the US dollar, if it doesn't strengthen against the main currencies, then at least maintains its position near the current levels. This is against the backdrop of continuing growth of Treasury yield, as well as all sorts of supposedly weakening aid programs.
This week, markets will closely monitor the publication of US employment data. We believe that if the number of new jobs in the non-agricultural sector turns out to be higher than expected, then this will support investors' positive mood who rely on the growth of the global economy and buy company shares. However, this will also be the reason for further increase in Treasury yields and the strength of the US dollar, which means that things will hardly change in the market.
Forecast of the day:
The EUR/USD pair is trading above the level of 1.1760. If it fails to hold above this level, it may decline to the level of 1.1700 after breaking it.
The GBP/USD pair is balancing above the level of 1.3755. After breaking through this level, the pair may further decline to 1.3675.
