Today we will discuss the general strengthening of the US dollar, which is already quite difficult to call a correction, because the US dollar index has strengthened by almost 2% from the previously reached lows. In addition, there are more and more signs indicating a global shift in sentiment in financial markets. Moreover, there are many reasons for the strengthening of the American currency, and we will talk about them today.
- I'll start with a very important topic, and not only for financial markets - AstraZeneca has stopped the 3rd phase of trials of the COVID-19 vaccine. Accordingly, the appearance of a vaccine from this company is postponed indefinitely, thereby increasing the uncertainty in financial markets, because the risk of another quarantine has increased. Therefore, the US dollar, which acts as a defensive asset, resumed its growth.
- The second driver of growth for the US currency, which is partly due to problems with vaccine testing, remains the sell-off in the US stock market. Let me draw your attention to the fact that the key index S&P500 has already lost about 8% in just a few days. At the same time, many companies from the tech sector fell by more than 20%, thereby contributing to the strengthening of the USD.
- Now let's move on to the European markets. Everything is not very smooth here too. Brexit problems are putting very strong pressure on the GBP, thereby contributing to the weakening of the GBP / USD currency pair, which has already fallen by more than 550 points or 4%. And last but not least, I would like to point out the ECB's position on the strong EUR. All these factors and some others contribute to the strengthening of the USD, which we have been observing for several trading days.
Moving to the American trading session, I would like to note the forthcoming announcement of the voting results on the main interest rate of the Bank of Canada. Since the probability of its change is very low, all the attention of market participants will be focused on the accompanying statement. But CAD traders also need to consider the change in oil prices.
Over the past five trading days, the price of “black gold” has been declining and there are a number of reasons for this. Firstly, OPEC is increasing its oil production, while global demand remains very low. Secondly, Saudi Arabia continues to cut prices for exported oil to Asian countries. As a result, we are witnessing a general weakening of the CAD amid the collapse of oil prices by more than 15%.