FINAM FOREX: The American currency is in demand in anticipation of the publication of “minutes” by the FRS

07 July 2021

Anna Zaitseva, analyst of FG “FINAM”

On Wednesday, July 7, the US dollar is consolidating near yesterday’s levels after a significant strengthening against the major world currencies a day earlier.

As of 11:54 Moscow time, the EUR / USD rate is down 0.03% and is trading at 1.18200, while the DXY dollar index is adding 0.02% and is at the level of 92.553. At the end of the previous trading session, the main currency pair fell 0.37% to 1.18197, while the DXY indicator closed up 0.14% at 92.543.

US Treasury yields fell to their lows since February this year after the release last Friday of a controversial report on the US labor market, but the dollar continues to enjoy increased demand from investors amid the publication of weak statistics on Germany, the eurozone and the US yesterday.

So, in Germany, the index of economic sentiment from the ZEW fell in July by 16.5 percentage points to 63.3 points, which was the lowest value over the past six months. At the same time, analysts predicted a result of 75.2 points. A similar indicator for the euro area dropped even more – by 20.1 pp to 61.2 points against the background of an increase in the incidence of coronavirus infection in the European region, despite significant progress in vaccination of the population. In addition, industrial production in Germany decreased by 0.3% (m / m) in May, as in the previous month, while, in accordance with the consensus forecast, an increase of 0.5% (m / m) was expected. …

In the US, data on business activity indexes from Markit and ISM became known yesterday, which also supported the strengthening of the dollar. Thus, the final estimate for the PMI index in the services sector for June was revised down by 0.2 pp to 64.6 points, compared with the result of 70.4 points a month earlier. ISM non-manufacturing PMI also showed a 3.9 pp decline in June to 60.1 points, which was worse than the consensus forecast of 63.5 points.

According to a number of experts, these data indicate that the recovery of the US and Eurozone economies is slowing down, and in the coming months one should hardly expect the same growth rates, while the risks of a new wave of a pandemic may make their own adjustments to market sentiments.

Also, market participants are waiting for the publication of the minutes of the last meeting of the Federal Reserve. “Minutes” of the FRS can shed light on the current sentiment in the regulator’s management regarding the need to adjust monetary policy and set the direction for the further movement of the American currency. This protocol will be published today at 21:00 Moscow time. In addition, today in the United States will become known data on the index of economic optimism from IBD / TIPP and the number of open vacancies in the labor market from JOLTs.

The EUR / USD rate continues to decline, approaching the level of 1.1800, which at the moment can act as a support. Stochastic lines are directed downwards, however, they are near the oversold zone, which may indicate a limited downside potential for the instrument in the short-term horizon.

This information is not investment advice.

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