Gold 1717,50
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EURUSD 1,2058
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DJIA 31162
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OIL.WTI 61,685
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DAX 14009,50
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The surge in the markets after bond yields rose has faded. At the moment, investors are at a certain wait-and-see stage to make further decisions. It can now be seen that without some forecasts it will be difficult to return to past levels.
DXY
Initially, many thought that rising US government bond yields might have pushed the Fed to tighten monetary policy earlier than planned. But at the next meeting Jerome Powell stated that the US Federal Reserve will stick to its low interest rate policy for a long time to come. Such conclusions completely ruin plans for an appreciation of the USD against other currencies. Continuing economic easing will invariably lead to a weakening of the USD against all world’s major currencies. Of course, all the other central banks will do their best to smooth these movements out, as it is not profitable to have a strong national currency against the USD in the current market situation. Therefore, in the near future, we will see a swing in the currency markets against the dollar.
The depreciation of the dollar is already very evident in the energy market. Such a boom in oil can hardly be characterised by a quick recovery of the world economy, when quite a number of countries are still quarantined due to COVID-19.
If the US Federal Reserve increases its treasury bond purchases, it means the realisation that inflation in the USA will develop faster than expected after all. Ahead are the next auctions for 10- and 30-year securities, which could once again set a serious trend in financial markets.
Looking at the Fed’s current statements, it is likely that economic and financial policy will not be adjusted much until there are clear signals. Sharp fluctuations in exchange rates, stock market failures are of little concern to the Fed, as they believe everything is within the bounds of deviation and does not need to be adjusted. Once they get close to their lows against other currencies, the US dollar may continue to fall in price, which would not be strange given the huge amount of cheap money flooding the US markets.
What’s in store for us today?
10.30 UK Construction Business Activity Index for February
11.00 EU retail sales in January
14.30 Initial Jobless Claims in USA
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