Dynamics of the currency market is fully dependent on the mood of investors (we expect EUR/USD and GBP/USD pairs to continue

The American dollar was trading in different directions in the main currency pairs, which was due to several reasons according to the results of Wednesday in the currency exchange market.

The dollar decline against commodity and commodity currencies on Wednesday following a wave of damping fears about the worldwide spread of the Chinese coronavirus, which has been conducting financial markets for the second month, scaring investors that if it spreads significantly on the planet, it will have the power to exert a widespread negative impact on global economic growth.

At the same time, New Zealand and Australian dollars rose due to higher value of commodity assets, as well as clear signals from local central banks about the prospects for easing monetary policies. In fact, they made it clear in the person of their leaders that although the rates will remain low, they should not be expected to decrease in the near foreseeable future. This state of affairs will support the exchange rates of these currencies, but only in the case again of general positive sentiment in the markets and growth in demand for commodity assets.

A similar situation is observed in pairs of the US dollar with the Canadian, and Norwegian kroner. The increase in demand for risky assets, paired with an increase in crude oil prices, pushes up the quotes of these currencies against the dollar. And again, such a situation will be observed only if the demand for oil and general positive sentiment in the markets remain.

On the other hand, euro and pound "live" according to slightly different rules. The consequences of Brexit's weaknesses in the economies of Britain and the eurozone, as well as rising expectations not only to maintain the current "soft" monetary rates of the Bank of England and the ECB, but the high probability of their further prospective weakening, especially with respect to the euro, have a significant negative impact on them. Assessing their immediate prospects, we believe that the EURUSD and GBPUSD pairs will decline. And here, as indicated earlier in previous articles, the main reason is not the unusual strength of the American dollar, but the "chronic weakness" of these currencies.

Regarding the dynamics of the Japanese yen against the dollar, it can be noted that it will remain captive to market sentiment associated with the demand for risky assets or not. Its increase puts pressure on the yen, and, conversely, the decline supports it.

In general, we should expect the continuation of the above trends if the general positive mood in the markets continues. But today, if data on consumer inflation in the United States shows growth, this could be an incentive for local strengthening of the US dollar.

Forecast of the day:

EUR/USD is trading above the level of 1.0865. The lack of inflation in Germany and, conversely, its increase in the United States may put pressure on the pair. In this case, it will rush to the level of 1.0840, and then to 1.0800, after declining below the level of 1.0865.

GBP/USD is trading above the level of 1.2935. Strong data on consumer inflation in the United States will put a couple of pressure. Thus, we consider it possible to sell it after breaking down the level of 1.2935 with the target of 1.2865.



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