Global markets ended a quite difficult week with mixed results. Stock indices in Europe and North America as a whole were in the "red" zone, while on the contrary, the Chinese ones increased. As for the dynamics of crude oil quotes, there was consolidation all week at the local highs reached in March. In the currency market, the US dollar has slightly risen against a basket of major currencies.
Following the extremely weak values in the number of new jobs for the month of April, the main reason for the negative sentiment in the markets was the publication of consumer inflation data in America, which showed that massive measures to support the population and businesses in the United States led to a noticeable increase in inflation. The most unpleasant thing was that a strong increase in inflation is superimposed on the clearly weak real pace of economic recovery, which was predicted by both the US Treasury and the Fed.
Investors will continue to closely monitor the release of important economic data this week, and unfortunately, American news will continue to play the leading role. So historically, the US economy and everything that happens in the local domestic financial market remains in the center of the world in terms of influence, and, despite lagging behind China, it still remains important for investors. The events during the previous week confirmed this once again.
This week, the focus is on the publication of data on applications for unemployment benefits, the index of manufacturing activity from the Federal Reserve Bank of Philadelphia and the value of sales in the secondary housing market.
We believe that the markets will consider the release of weak data as positive again, while maintaining the course of the super-soft monetary policy. In view of this, investors can assess the slowdown in economic activity in the US as a reason for the continuation of massive purchases of company shares amid some correction that has already happened.
In terms of the prospects for the US dollar in pairs with major currencies, we believe that its local strengthening may end if the above-mentioned proposed scenario takes place on the stock markets. In addition, a general improvement in market sentiment will lead to a renewed demand for commodity and raw materials assets.
In general, the new trading week may show an increase in positive sentiment on the stock and commodity markets amid the US dollar's weakening.
Forecast of the day:
The EUR/USD pair remains in a short-term upward trend. An increase in the positive mood in the markets will put pressure on the US dollar. In this case, the pair will retest the level of 1.2175, breaking through which will lead to further growth to the level of 1.2230.
The resumption of demand for crude oil in the markets, as well as the possible weakening of the US dollar, will lead to a new decline in the USD/CAD pair. Its fall below the level of 1.2090 will be the basis for a decline first to 1.2045, and then to 1.1975.
