Global markets continue to live in categories of mastering in the future of new dollar liquidity, which is expected to arrive with the approval of the US Congress at the end of this month.
This is a really important factor that has recently, along with the process of vaccinating the population and waiting for the early recovery of the world economy, especially the Western countries, stimulated demand for company shares and commodity assets. In this situation, the American dollar remained under pressure, but at the same time continued to stay afloat, which was largely facilitated by a sharp increase in the yield of trigeris in the wake of sales in the public debt market.
We have previously indicated that the state of euphoria in the markets reached the highest degree, but on Tuesday it seems that some realization began to appear on the market. Demand had declined gradually amid the lack of new growth drivers. This caused a partial profit fixation, which caused a local decline in stock indices around the world.
The situation in the foreign exchange market remains uncertain. On the one hand, the US currency receives support amid a sharp increase in US Treasury government bond yields, so the yield on the benchmark of 10-year trigeris on Tuesday simply soared up and on Wednesday is above the 1.3% level, showing a confident movement to the pandemic marks. On the other hand, large-scale stimulus measures by the FED, as well as fiscal support measures from the American government, prevent it from growing. In fact, we continue to observe tug of war in foreign exchange markets between the dollar and primarily major currencies, which causes a sharp local increase in the dollar and its decline. The dynamics of the dollar exchange rate is also likely to remain balancing above the 90-point mark on the ICE index this week.
A clear outsider in this situation is gold, which, trading against the dollar on Tuesday, noticeably decreased and at the time of writing is below $1800 per ounce. The reasons for the decline in yellow metal quotes are the fall in demand for gold as a protective asset, which caused its strong growth last year, as well as the strengthening of the position of the dollar amid a sharp increase in the yield of trigeris. Assessing the prospects for precious metal, we believe that its decline may resume after falling below the level of 1790.00.
What should be expected in the markets?
It is likely that we should expect a resumption of growth in the equity markets in the near future, but due to the lack of new growth drivers, the correction that has begun may continue. How deep it will be, while it is difficult to say. Everything will depend on the decision of large players to continue fixing profits or not.