FINAM FOREX: High risk appetite contributes to the weakening of the US dollar


10 February 2021

Anna Zaitseva, analyst, FINAM Group

On Wednesday, February 10, the EUR / USD pair is trading up 0.06% at 1.21260, after gaining 0.56% the day before. The DXY dollar index is down for the fourth day in a row, shedding 0.04%, and is at 90.382 after falling 0.54% the day before.

Expectations of a new package of fiscal stimulus in the United States and solid corporate profits on the basis of IV Quarterly, interest in risky assets is supported, while demand for defensive instruments such as the US dollar is declining. At the same time, investors still disagree about the impact of the package of state support for the US economy being considered by the legislators on the dollar exchange rate. Some economists believe that additional stimuli will contribute to a rapid recovery of economic activity in the United States and, as a result, will increase demand for the dollar. Those who argue otherwise believe that the economic recovery will lead to reflation around the world, which will lead to an increase in demand for risky assets and will contribute to the weakening of the US currency.

As for the prospects for the EU economy, they currently look much worse than in the United States, due to the low rates of vaccination of the population in the countries of the Old World. So, the daily rate of vaccination in the European Union is currently about 0.12% of the total population, which is four times lower than in the UK and the United States. However, this fact does not prevent the European currency from strengthening against the dollar this week.

In terms of macroeconomic statistics, data on foreign trade became known in Germany yesterday. Thus, the trade balance amounted to 14.8 billion euros in December against 16.7 billion euros a month earlier. At the same time, exports increased by 0.1% (m / m) compared with an increase of 2.3% (m / m) in November, while analysts had expected a decline of 1% (m / m). At the same time, imports decreased by 0.1% (mom) against an increase of 5.4% (m / m) a month earlier and the consensus forecast of -1.1% (mom). The current account balance was € 28.2 billion, compared with € 21.2 billion in November.

In the States, data on the number of open vacancies in the labor market from JOLTS was released. In December, the value of the indicator was 6.646 million compared to 6.572 million a month earlier, while analysts had expected a decrease to 6.5 million.

On Wednesday, we should watch the publication of inflation data in Germany, and in the US inflation and the volume of inventories in wholesale warehouses will become known. Also today will be the speeches of the head of the ECB Christine Lagarde and the head of the Federal Reserve Jerome Powell.

The EUR / USD rate continues its upward movement and is approaching the upper border of the range 1.2000-1.2150. Stochastic lines are still in a favorable position for buying, and therefore, in the short term, we can expect a test of the level of 1.2150.

This information is not investment advice.

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