FINAM FOREX: US Dollar Strengthening Continues


03 February 2021

Anna Zaitseva, analyst, FINAM Group

On Wednesday, February 3, the EUR / USD pair is showing near-zero change after yesterday’s two-month low at 1.2011. At the same time, the DXY dollar index on the eve reached its maximum value since early December and closed at 91.189, and today is trading at 91.088.

It should be said that the strengthening of the American currency is taking place despite a rather high risk appetite in global markets. So, this week the stock markets resumed growth, and oil prices reached the highest levels in the last 10 months.

In addition, quite good macroeconomic statistics for the eurozone and the United States were published yesterday, which, however, did not stop the dollar buying.

So, on Tuesday, data on the GDP of the eurozone came out. According to preliminary estimates, gross output in the EU declined by 5.1% (y / y) in Q4 against a 4.3% (y / y) decline in Q3, which turned out to be 0.3 pp higher than consensus – forecast. Nonetheless, the eurozone has seen a decline in GDP for four consecutive quarters, and Q1 2021 is likely to be no different amid ongoing quarantine restrictions in several European countries and disruptions in the supply of coronavirus vaccines. An additional risk factor for the EU economy may be the delay in agreeing on a pan-European recovery plan, given the political crisis in Italy.

At the same time, the February data on the index of economic optimism IBD / TIPP, published yesterday in the USA, showed an increase to the maximum value in the last four months of 51.9 points. This is probably due to the expectations of market participants regarding the imminent adoption of a new stimulus package for the US economy in the amount of $ 1.9 trillion. It is worth saying that yesterday the US Senate voted to start debate on the 2021 budget, taking into account the additional costs associated with the coronavirus. Despite the lack of support for this bill from the Republicans, the likelihood of its approval is quite high given the Democratic leadership in Congress.

The final January data on service PMIs in the eurozone, Germany and the US are expected to be released today. In addition, in the eurozone there will be data on inflation and producer price index, and in the US – data on changes in employment from ADP and indexes of new orders, prices and employment in the non-manufacturing sector from ISM.

The EUR / USD rate is approaching the level of 1.2000, which at the moment can be considered as support. Stochastic lines are directed downward, however, the “fast” line has already reached the oversold zone, and therefore the potential for further decline for the instrument looks limited in the short term.

This information is not investment advice.

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