Anna Zaitseva, analyst, FINAM Group
On Friday, March 26, the US dollar corrected slightly down after a significant strengthening the day before. As of 11:40 Moscow time, the EUR / USD rate is growing by 0.14% and is at around 1.17833, while the DXY dollar index is down 0.06%, trading at 92.767. A day earlier, the euro weakened against the US currency by 0.32%, to 1.17733, and the dollar index rose by 0.32%, to 92.826, which was the highest value since November last year.
The dollar is supported by growing yields on US Treasuries, favorable macroeconomic statistics for the US, as well as worsened expectations for the European economy in connection with the third wave of coronavirus infection.
US Treasury yields turned up again after three days of decline. Thus, the yield on 10-year securities is at 1.648%, and on 30-year issues – at 2.373%.
The US macroeconomic statistics released yesterday also contributed to the strengthening of the American currency. According to the final estimate, GDP increased by 4.3% qoq in Q4, which turned out to be 0.2 pp higher than the preliminary data.
In addition, the number of initial applications for unemployment benefits in the previous week for the first time since March last year dropped below 700 thousand, reaching 684 thousand, which turned out to be significantly better than the consensus forecast of 730 thousand.
At the same time, the euro is under pressure from the pandemic situation in Europe, which worsens the medium-term prospects of the European economy. So, in Germany, France, Italy, Austria, Hungary and Poland, there is a steady increase in the number of people infected with coronavirus infection, while the current rates of vaccination do not yet allow to reverse the negative trend. In these conditions, the ECB promised to increase the rate of buying government bonds from the market in order to limit the growth of their yields, which reduced the attractiveness of the euro in comparison with the US dollar.
At the same time, the April data on the German consumer confidence index released yesterday showed unexpected growth. The value of the indicator was -6.2 points, which turned out to be higher than the previous result of -12.7 points and analysts’ expectations of -11.9 points.
Today you should pay attention to the publication in Germany of data on the Ifo business climate index, and in the USA – data on income and expenses of individuals, stocks in wholesale warehouses, trade balance of goods and a number of indicators from the University of Michigan.
The EUR / USD rate has broken through the level of 1.1800 and is trying to gain a foothold below it. Stochastic lines are in a highly oversold zone, and therefore a pause in the downward movement of the instrument is likely in the short term.
This information is not investment advice.