The New Year on financial markets began with a strengthening of the US dollar. After the turbulent events of the beginning of the month, investors’ activity began to decline, which is manifested in the consolidation of stock indices and uncertain dynamics in the currency markets gradually.
Financial markets are again in a state of something in between – uncertainty and expectation. As for the uncertainty factor, investors understand that, despite the start of production of vaccines against coronavirus infection and the actual vaccination process itself, the dynamics of COVID-19 remains uncontrollable, and hence the lockdowns in Europe and records for sick and dead in America. This factor’s influence remains significant, as it has a great impact on Western countries’ economies, and through them, on the entire world economy.
Concerning the expectation factor, it generally remains positive. Investors hope that after the disastrous 4th quarter of last year, the first and second will be much better. Besides, the focus of the market remains on the topic of additional stimulus measures from Joe Biden’s government after his inauguration. However, if you carefully observe the overall picture of support measures’ impact, they have almost lost all their effectiveness. They only contribute to the inflation of financial bubbles, eventually bursting. Also, investors focus on the beginning of companies’ corporate reporting, which will affect the demand for company shares, and through this, the overall picture on the markets, including foreign exchange.
What to expect soon:
Observing everything that happens, I believe that this week the general period of consolidation in the markets will most likely continue.