Anna Zaitseva, analyst of FG “FINAM”
On Thursday, July 22, the US dollar is consolidating after falling a day earlier against the world’s leading currencies. The recovery in risk demand in global markets was helped by strong corporate reports in the US, while the risks of a pandemic faded into the background.
As of 11:44 Moscow time, the EUR / USD rate is down 0.02% and is trading at 1.17940, while the DXY dollar index is growing by 0.02% and is at 92.767. At the end of the previous trading session, the main currency pair gained 0.09% to reach 1.17926, while the DXY indicator closed 0.24% lower at 92.759.
Global markets are seeing a recovery in risk appetite, driven largely by strong corporate reporting data from US companies. Against this background, the risks of a new wave of pandemic due to the spread of a new strain of the Delta coronavirus faded into the background. Investors expect the current rise in global disease to delay the lifting of restrictions and opening of borders by up to three months, as many countries are more aggressively implementing vaccination programs in response to the spread of the virus.
If we talk about the main currency pair, its further dynamics will depend on the results of today’s meeting of the European Central Bank. After the ECB announced a new inflation target last week, market participants now expect the regulator to stick to ultra-soft monetary policy for a long time to come and become the last among the leading central banks to move to tighten monetary policy.
At the same time, the acceleration of inflation in the US has already led to a change in expectations regarding the FRS monetary rate. If earlier investors were waiting for a rate hike after 2023, now expectations have shifted to 2023. In addition, experts predict that the Fed will announce the curtailment of the quantitative easing program (asset purchases) in August-September and will start implementing this towards the end of this year.
Thus, in the medium term, the differences in the monetary policy of the European Central Bank and the Fed, other things being equal, will contribute to the weakening of the euro against the dollar.
In terms of macroeconomic statistics, yesterday important indicators for Europe and the United States were not published. Today it will be necessary to monitor the release of data on the consumer confidence index in the eurozone, and on the index of national activity from the Federal Reserve Bank of Chicago, the number of initial applications for unemployment benefits and sales in the secondary housing market. Also today will be a speech by the head of the ECB Christine Lagarde following the meeting of the regulator.
The EUR / USD rate returned to the level of 1.1800, from which it went down again. Stochastic lines are directed downwards, however, they slowed down the decline, which indicates a weakening of the downward impulse for the instrument and the likelihood of quotes consolidation in a sideways range in the short-term horizon.
This information is not investment advice.